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Sledgehead

Oap's Retirement Fund = Childrens' Inheritance

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Different generationsa are relying on the same property to improve their financial position, research showed today.

While older people plan to release equity from their hom eto make their retirement more comfortable, their children are expecting to receive a substantial inheritance INCLUDING the family home, accoring to support services group Sesame.

Dowjones Newswires

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Oh, hello Circle, have you met Square? Square, this is Circle.

Square THAT circle bulls...

Boomers, relying on house equity for retirement, i.e. selling house to Gen X

Gen X'ers, relying on inheritance to be able to afford house...

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Oh, hello Circle, have you met Square? Square, this is Circle.

Square THAT circle bulls...

Boomers, relying on house equity for retirement, i.e. selling house to Gen X

Gen X'ers, relying on inheritance to be able to afford house...

If FTBs were waiting for their parents to pop their clogs before they bought, the average age of an FTBer would be about 50.

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Oh, hello Circle, have you met Square? Square, this is Circle.

Square THAT circle bulls...

Boomers, relying on house equity for retirement, i.e. selling house to Gen X

Gen X'ers, relying on inheritance to be able to afford house...

Easy. Every family has to have one home for themselves, and one home for each of their children.

Billy Shears

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If FTBs were waiting for their parents to pop their clogs before they bought, the average age of an FTBer would be about 50.

They are. I saw a survey saying that many are relying on/ hoping for inheritance to pay off mortgage (i.e. buy the house, before that you are co-owning/ renting)

So, FTB buys house at 34 on 20-25 IO mortgage, trusting on inheritance to pay off principle at around 50-55 or so. If parents have spent it on retirement & nursing fees, o crap.

Edited by okonu

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They are. I saw a survey saying that many are relying on/ hoping for inheritance to pay off mortgage (i.e. buy the house, before that you are co-owning/ renting)

So, FTB buys house at 34 on 20-25 IO mortgage, trusting on inheritance to pay off principle at around 50-55 or so. If parents have spent it on retirement & nursing fees, o crap.

That seems incredibly selfish and risky to me.

Kind of relies on you parents dying of a cheap and quick illness, rather than them having to sell the house to pay for residential care somewhere. That sort of thing is "means tested" and if you've got a house they'll take it.

Personally I'd like to see my parents enjoy every last minute of their retirement and in my opinion that's likely to result in them passing away with the bank account at zero.

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Of the 4 friends I know that have bought (late 20's), all have only been able to do so having help from parents/inheritance.

The problem is that this is arguably sustainable for a 30 year period. The consequences socially are dire and the gap between the haves and have nots will only grow. Unfortunately for the rest of us this government is too blinded by short termism to realise that we are returning to pareto imbalance.

Does anyone honestly think that this is going to be any better when over 50% of the voting population are over 50 as we are rapidly heading towards?

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They are. I saw a survey saying that many are relying on/ hoping for inheritance to pay off mortgage (i.e. buy the house, before that you are co-owning/ renting)

So, FTB buys house at 34 on 20-25 IO mortgage, trusting on inheritance to pay off principle at around 50-55 or so. If parents have spent it on retirement & nursing fees, o crap.

I think you'll find most of them are relying on grandparents inheritances...... - the parents ought to have been prudent enough to cover their own **** when things were much more affordable....

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In economics it is the "life cycle hypothesis" (that most people will seek to smooth out income over lifetime, so go in debt when young, build up savings thru middle age, then live off savings till death) And yes, the aim is to die with zero.

But, this "LCH" by definition means that there is a substantial wealth effect on consumption, independant on income. As wealth changes, peoples' perception of what they can spend/ save changes. E.g. My shares have doubled - can reduce savings.

But what happens when two generations are counting the same assets in their implicit calculations? E.g. no need to scrimp & save to pay off mortgage, as Mum's place is worth a fortune. Or - OK to go even massively into debt for this 3 bed house, as Mum's place is worth a fortune.

But if Mum is following her LCH spending, she should (rationally) be having a much more comfortable retirement than planned, thanks to her windfall in HPI.

The nrt result would be overconsumption...

I think you'll find most of them are relying on grandparents inheritances...... - the parents ought to have been prudent enough to cover their own **** when things were much more affordable....

But if the parents are relying on the grandparent's equity for their pension...

Alan Clarkes diaries are a classic on this. The moral anguish of waiting for your parents to shove off to solve your financial problems, while also wishing them a long and healthy life. Lots of intergeneration conflict (esp as his widowed father remarried someone he saw as spendthrift...)

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Alan Clarkes diaries are a classic on this. The moral anguish of waiting for your parents to shove off to solve your financial problems, while also wishing them a long and healthy life. Lots of intergeneration conflict (esp as his widowed father remarried someone he saw as spendthrift...)

But parents who have been on this path and been paying for kids are going to find that their costly offspring have now buggered off to their own homes and so they have 10-15 years to save for their own retirements without kids being a cost burden and with little debt as they probably bought their family sized house when the kids were young, some 20odd years ago.... so mortgage paid off unless they really have been daft.

I appreciate that there are some remarkably shortsighted people out there, but surely there can't be THAT many.

My parents can keep their house and their assets, I don't want them - it's theirs to do what they like with - they earned it - they can spend it, give it to the cats' home - just don't give it to the damned government. Surely we make our own way in life, waiting for misfortune to others is being a bit crap.

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Just a thought... If more OAPS remove equity from there property, wont this cause prices to fall because people wont get as much inheritance to spend on buying a property, same goes with inheritance tax. The more inheritance tax people get charged the less money is available.

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But parents who have been on this path and been paying for kids are going to find that their costly offspring have now buggered off to their own homes and so they have 10-15 years to save for their own retirements without kids being a cost burden and with little debt as they probably bought their family sized house when the kids were young, some 20odd years ago.... so mortgage paid off unless they really have been daft.

I appreciate that there are some remarkably shortsighted people out there, but surely there can't be THAT many.

My parents can keep their house and their assets, I don't want them - it's theirs to do what they like with - they earned it - they can spend it, give it to the cats' home - just don't give it to the damned government. Surely we make our own way in life, waiting for misfortune to others is being a bit crap.

Retirement is likely to be 20-25 years. If you think you can save enough in 10-15 years, you have a very good financial advisor! (or are willing to accept a very low standard of living for 30-40 years)

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Oh, hello Circle, have you met Square? Square, this is Circle.

Square THAT circle bulls...

Boomers, relying on house equity for retirement, i.e. selling house to Gen X

Gen X'ers, relying on inheritance to be able to afford house...

Simple, some of the equity is released to retirees but the bulk remains in tact.

Another key reason I gave for longterm HPI was this. As usual the megabear intelligencia dismissed me because I didnt have a graph. You see there are'nt graphs for current emmerging trends, you just have to spot the trends.

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Retirement is likely to be 20-25 years. If you think you can save enough in 10-15 years, you have a very good financial advisor! (or are willing to accept a very low standard of living for 30-40 years)

You are making £20K a year at 50 (kids gone, mortgage paid). You surely can save £500 a month (given you have survived on that with kids) - that's about £90K in 15 years - you and your missus retire at 65 - my missus got some crap through the post from the government last week tellling her when she retires she can expect to get £163 a week (seemed wrong to me, but it must be true, it came from the pensions people :) ) - you get the two state pensions and you expect to live 20 years - so you take £7K a yearish out of the pot which is the interest plus some of the capital and you get your state pensions and bingo, you are still on your £20K a year plus you are not having saving your £500 a month and as you get to your 80's, you won't be spending as much on enjoying yourself anyway.

Your lifestyle never changes (I am assuming wage rise and inflation don't get overtaken by living costs masively) - so where's the pauperdom ? If you increase the wages to £40K, then it's even easier, make it £60K etc. etc. Not paying the mortgage makes a much larger lump sum available for money in old age - the more you earn, the larger your mortgage, so the more you will have spare to save when it's paid and the kids are gone, so your lifestyle gets maintained....

Or have I missed something ?

This ignores pensions as I think that I can't trust the government with my money, even with the tax breaks on contributions - if you do, then you can increase those numbers significantly though you will lose the right to draw down the capital as you will have given to the thieving annuity company

[Currently I pay about 30% of net wages into my repayment mortgage (took it over 18, not 25 years), I also overpay a further 25% of net wages off my mortgage balance and save a further 10% in various savings accounts] - the rest is for spending (we live pretty well on this) ! - when the mortgage is gone, we will be able to save 65% (assuming same wages) of net wages each year into our old age pots]. I should think that after 10 years of saving like that, we ain't going to be in the poorhouse.

Edited by Rachman

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Or have I missed something ?

Yes. Inflation.

22% rises in the cost of gas? 10+% rises in council tax? Trebling of the price of oil? How do you pay for that when you're on a fixed income and burning through your savings?

Ah, if you're sensible you sell your overpriced house and move abroad to a country with a low cost of living.

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Yes. Inflation.

22% rises in the cost of gas? 10+% rises in council tax? Trebling of the price of oil? How do you pay for that when you're on a fixed income and burning through your savings?

Ah, if you're sensible you sell your overpriced house and move abroad to a country with a low cost of living.

Plus those rises affect everyone, whether in debt or not, all you do is put yourself in a better position - if that happens long term, we are almost all screwed.

Plus I did not factor in ANY growth on the £500 a month over the 15 years, that's a base £90K paid in with no allowance for any interest, let alone higher interest rates.

Right, and a lot of that gets offset by higher interest rates, the falling price of consumables - inflation works both ways - if in debt it's a bugger, for a saver, it's not historically been a major problem. You are not on a fixed income, you work out the balance and you work out what you need to take out. If inflation is 15%, then interest rates won't be 4.5%, will they......

Plus you are right, you release capital to save the Labour Reich getting their hands on it and wasting it on doleite trash and their own pensions early. It's a game of balances and strategy, the aim is to make sure you have enough pieces to still be playing at the end....

Edited by Rachman

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OAP’s now need to sell their property because the state pension that they have paid towards all their working lives pays such a low amount that pensioners have little choice not to MEW.

The younger generation will not get a state pension and most can not take out a private pension because taxes leave little room for saving and even then these private pension companies can rip us off and government does little about it all as the MP’s are all on the board of directors for these types of companies.

You have the chance to fight now and kick government into order or starve and certainly be cool later as even working people will not afford energy prices with all this tax on them.

Some people are so stupid that they are borrowing to keep the bailiffs away instead of dealing with the real burden, Big Brother and his large pockets.

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Some people are so stupid that they are borrowing to keep the bailiffs away instead of dealing with the real burden, Big Brother and his large pockets.

So shrink the ridiculous benefit system to sensible levels, put the career doleites on the poverty line and make them work so the cost burden to all of us falls and we can afford to pay either higher energy prices or they can afford to cut taxes to pay for them using money taking off the benefits budget - plus we won't be burning coal and oil for power like we are today in 40 years - they will be reducing our reliance on it - they have to or we'll all be dead in a nuclear war arising out of lunatics like Bush and Iamadinnerjacket....

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If inflation is 15%, then interest rates won't be 4.5%, will they......

Gas prices went up 22% and I believe council tax is up around 10% in the last year. While interest rates are 4.5%.

Old farts are unlikely to be spending a large fraction of their income on iPods and DVD players, so they get to pay the _REAL_ rate of inflation, not the government's faked figures.

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Gas prices went up 22% and I believe council tax is up around 10% in the last year. While interest rates are 4.5%.

But you can't simply extrapolate the worst of everything at the worst of times. Doing that is why some of the bears don't have make things worse for themselves - the worst case scenarios are just that. If energy prices keep rising, you know as well as I do, there is spin and lies about inflation to keep other things going - so if it becomes impossible to hide, then rates will have to rise....

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Fair enough. I do my retirement calculations on 4% (i.e. need a lump sum 25 time my required retirement income) I think one can spend 4% a year of the capital, and have it just about keep place with inflation (with 40% in index linked gilts, 60 in index funds)

For me - that is a minimum lump sum of 900k - plus house fully paid for. Others expectations of life may be lower...

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You are making £20K a year at 50 (kids gone, mortgage paid). Or have I missed something ?

You're assuming the mortgage has been repaid - in reality, the parents have probably MEWed to help out with the costs of uni.

And you're assuming they've managed to get rid of those pesky kids - more likely they are stuck with kippers who are staying at home to save money for themselves, but are often a net drain on the family's funds.

(Before the howls of protest start - the posters on this site may be perfect stay-at-homes, but from what I've seen and heard, there are plenty of kippers who aren't).

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You're assuming the mortgage has been repaid - in reality, the parents have probably MEWed to help out with the costs of uni.

Of my and my brother's peers, not one has had university funded to a huge extent by parents' borrowings - and let's be honest, if your kid's going to bother to put in the effort you as a parent would and work in the holidays, then it's only rent that needs paying plus maybe a bit of fees. That's not exactly going to break the bank is it (£10Kish). This is not the US where it can cost north of $100K to put someone through college [yet !]

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That seems incredibly selfish and risky to me.

Kind of relies on you parents dying of a cheap and quick illness, rather than them having to sell the house to pay for residential care somewhere.

what about "the third way" i.e. the traditional solution of bringing the folks into your own home so that you can all support each other in one way or another?

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my grandparents' generation:

house, no pension; had state pension and savings. Will leave house and savings to children, who will use it to pay off their mortgage.

my parents' generation:

house, small pension. Will pay off house with inheritance from their parents. Will then need to use house to fund more pension. No inheritance for kids.

OMG, what happens to my generation?

No house; no pension; paying for everyone else's pension; no inheritance, can't leave any inheritance to kids. Great future ahead :(:o

I don't get to have any kids because I couldn't afford it, so there is no next generation. :(

Edited by Zaranna

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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