How much to spend on retirement boat

[Seevee]

And, TOTALLY agree with Ted. Our personal dollars are just that.



I'd bet the moderators would agree that discussing costs of boats, purchasing them, financing them, running them and some of the pitfalls is certainly more appropriate for this forum.


I could argue strongly, it's inappropriate to ask anyone for their personal financial information.... including their advisors, bankers, etc.


Let's get back to the boating costs.

 

[smitty477]

Oh, now I get it, you're just an Internet Troll. I had you pegged for an internet PREDATOR or one of those scumbags that tries to steal your identity or your investments.

This is a boating form. I have referred a number of members to boating related businesses that I have used. So when you posted this:


I thought how weird is this. Who asks for information about the people who handle my personal or financial affairs. I would no more give you the name of my financial planner, than my lawyer, tax preparer, personal banker, doctor, or dentist. So I ignored your post.

Apparently you didn't take the hint and posted this:

So I explained to you that my financial planner is a member of my family and retired. This is completely true and anyone with honest intentions would have taken the hint and let it go.

Clearly you didn't have honest intentions and wrote this:

At this point it's clear you're up to no good and try to blow you off.



Then you wrote this;



You should consider yourself lucky. I was considering reporting you to the moderators as someone that might be up to criminal activity. But I wasn't sure, so I just cut you off.

Recieved a few PM in the last couple of hours. Apparently you're a known Internet Troll here on the forum.

Let me be clear about this, I care less than not at all whether you think I have a family member as a financial planner. The sad part is that you lack the maturity to just simply say it. Why don't you just find a bridge to play under instead.

Ted

No troll here at all report all you want to the moderators I have participated posts on this site with data for years - and even sold a few boats with the sites help along the way.
So your posts indicated that you could view a situation where personal taxes would present a great reason to finance a boat and smooth out the taxes instead of pulling all funds out at once.
At that time instead of presenting a mathmatical reason why that is a good idea your response was that your planner would not support that.
I guess that sounds a lot better than my retired relative does not think thats a good idea.
It is likely you still cannot see whay there would be a reason why financing a boat can be a good method on some ocassions. I do not think you want to discusss that at all.
If you really do have a financial planner , and if they really are current and have a license and they are trained they will explain to you that all the rest of your 'fears' are completely unfounded.
We will be in Florida often in the new year - maybe we can come visit some time.

 

[smitty477]

And, TOTALLY agree with Ted. Our personal dollars are just that.



I'd bet the moderators would agree that discussing costs of boats, purchasing them, financing them, running them and some of the pitfalls is certainly more appropriate for this forum.


I could argue strongly, it's inappropriate to ask anyone for their personal financial information.... including their advisors, bankers, etc.


Let's get back to the boating costs.

"I could argue strongly, it's inappropriate to ask anyone for their personal financial information.... including their advisors, bankers, etc."

I am surprised - asking about a referrral to a person or a company that has given good service or products in the past is not OK?
Is it possible that my recent posts about boats, parts, and sources of information to you have should have been included then?

 

[smitty477]

Mahal,


You make a good point, but some of have no desire to have a new car regardless of the gimicks. But money isn't free and I'd be surprise if there wasn't a cash discount on the table. Again, I'd never know as I buy used cars and run them til they die. I'll spend my dollars on boats, beer and wild women... the rest I'll waste.

What about a situation where pulling funds for a boat (or anything else) in a specific year would trip taxes in the area of 30% or more?
But by financing at 4.5% with a no prepayment penalty boat loan and speading the draw downs over 2-3 years you could halve those taxes.

It really becomes just math - similar to planning potential early Roth conversions and tax gain harvesting. Just math which will favor financing in some cases ....

 

[OldDan1943]

I wonder if we can get a 'as seen on TV' reverse mortgage on a boat loan?
LOL

 

[Seevee]

What about a situation where pulling funds for a boat (or anything else) in a specific year would trip taxes in the area of 30% or more?
But by financing at 4.5% with a no prepayment penalty boat loan and speading the draw downs over 2-3 years you could halve those taxes.

It really becomes just math - similar to planning potential early Roth conversions and tax gain harvesting. Just math which will favor financing in some cases ....

Smitty477,



Sure, you can justify financing a toy... lots of ways to do this. I just argue it's very often not the best thing for one's financial safety, and it's been proven time and time again.... especially in retirement. Yes, there may be some tax advantages, but a lot of folks with good planning have minimized their tax obligations going into retirement.



I can understand your logic, and may make sense in some situations, but I would be not the best for the vast majority of us.


What I could argue for, is to put that debt on an income producing asset and use those dollars to pay cash for your boat.



Now, there's a lot of folks lately that just have had the idea of finance the hell out of their toy and just enjoy it to the hilt until it's repossessed.


And, there's perhaps the idea of coming across a killer deal where you need to borrow the dollars to make that happen. However, I could argue borrow the money from a low interest source and pay it back ASAP.


And in the case where you have a terminal condition, and just want to enjoy those last few year... hell, do whatever it takes.

 

[mvweebles]

I wonder if we can get a 'as seen on TV' reverse mortgage on a boat loan?
LOL

Great idea - sounds like a great way to become a millionaire.....assuming you start with multi-millions (and know when to stop).

 

[O C Diver]

One can make a case for financing a toy based on a fixed income stream as they lack the assets to pay for it or don't want to generate the tax penalty. The problem is that the income stream can become inadequate or can go away.

One only has to look at the 1970's to see high double digit inflation reduce the buying potential of fixed stream income from a pension or social security.

One only has to look at the Great Depression and 2008 through 2010 to see the value of the stock market, real estate, and many toys crash in market value. It's easy to find stories of companies going under leaving their pensioners in desperate situations or the companies profits drastically reduced requiring dividend cuts. In this time, safer income from treasury notes and safe bonds also plummeted. In recessionary times, the value of real estate and toys may drop to a point of negative net worth meaning that a person can't afford to liquidate them to end the carrying costs. One only has to look the real estate market from 2008 through 2012 in many parts of the country to see depressed values driven by foreclosure domination.

Finally, no one can predict the future whether it's the stock market, taxes, cost of food, energy, or other segments of our retirement lives. There are some on this forum with 8 to 10 figure net worths where financing toys in retirement is a near zero risk leveraging tool. The vast majority of us don't enjoy that situation and must be exceptionally prudent in our wealth preservation.

That's how I see it, and why I take a very conservative approach to buying toys and not financing anything in retirement. Obviously people are free to do as they please.

Ted

 

[mvweebles]

Finally, no one can predict the future whether it's the stock market, taxes, cost of food, energy, or other segments of our retirement lives. ...... I take a very conservative approach to buying toys and not financing anything in retirement. Obviously people are free to do as they please.

Ted

It's a risk-thing Ted. For many people who own a large discretionary asset like a boat, there comes a point in their life where their lifestyle is set and they want certainty around long term expenses - I recently installed solar on a house not because it was a good investment (though it is), but as a hedge against rising electricity rates.

For many people who have had a modicum of success through hard work and perhaps some luck, there comes a point where there is no up-side to more money: doubling their net-worth might increase their bequests, but would not have a meaningful impact on their lifestyle. But halving their net worth would have a severe impact, so it changes their investment strategy - they cash-in and walk away from the table.

What I can't explain is how anyone can talk about boats and tax hedges as if boats are something other than a lousy investment. Maybe you can make it suck less, but the most expensive boat by far isn't one that has the highest taxes, but the one with the least usage.

Peter

 

[MurrayM]

...One only has to look at the Great Depression and 2008 through 2010 to see the value of the stock market, real estate, and many toys crash in market value...

Something to ponder:

https://www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/

 

[smitty477]

Smitty477,



Sure, you can justify financing a toy... lots of ways to do this. I just argue it's very often not the best thing for one's financial safety, and it's been proven time and time again.... especially in retirement. Yes, there may be some tax advantages, but a lot of folks with good planning have minimized their tax obligations going into retirement.



I can understand your logic, and may make sense in some situations, but I would be not the best for the vast majority of us.


What I could argue for, is to put that debt on an income producing asset and use those dollars to pay cash for your boat.



Now, there's a lot of folks lately that just have had the idea of finance the hell out of their toy and just enjoy it to the hilt until it's repossessed.


And, there's perhaps the idea of coming across a killer deal where you need to borrow the dollars to make that happen. However, I could argue borrow the money from a low interest source and pay it back ASAP.


And in the case where you have a terminal condition, and just want to enjoy those last few year... hell, do whatever it takes.

"Sure, you can justify financing a toy... lots of ways to do this."
In some cases its not justification but rather the best financial decision to be made, in some cases by a long shot.

"I can understand your logic, and may make sense in some situations, but I would be not the best for the vast majority of us."
I absolutly agree with your summary here - and that is why each time I have limited my thoughts to "some situations". It really becomes just math.

 

[Codger2]

What I can't explain is how anyone can talk about boats and tax hedges as if boats are something other than a lousy investment. Maybe you can make it suck less, but the most expensive boat by far isn't one that has the highest taxes, but the one with the least usage.

Peter

That was certainly true in my case. I could still afford it but the non use was really bugging me.

 

[smitty477]

Smitty477,



Sure, you can justify financing a toy... lots of ways to do this. I just argue it's very often not the best thing for one's financial safety, and it's been proven time and time again.... especially in retirement. Yes, there may be some tax advantages, but a lot of folks with good planning have minimized their tax obligations going into retirement.



I can understand your logic, and may make sense in some situations, but I would be not the best for the vast majority of us.


What I could argue for, is to put that debt on an income producing asset and use those dollars to pay cash for your boat.



Now, there's a lot of folks lately that just have had the idea of finance the hell out of their toy and just enjoy it to the hilt until it's repossessed.


And, there's perhaps the idea of coming across a killer deal where you need to borrow the dollars to make that happen. However, I could argue borrow the money from a low interest source and pay it back ASAP.


And in the case where you have a terminal condition, and just want to enjoy those last few year... hell, do whatever it takes.

One other thought and a different way to view this based on your comment here:
"Yes, there may be some tax advantages, but a lot of folks with good planning have minimized their tax obligations going into retirement."

When financially planning for retirement it is often a best practice to keep taxes as smooth as possible along all years. When planning to optimize taxes for potential actions like Roth conversions that can mean limiting draws of funds for Roth converts and accomplishing those over a number of years.
In some cases this would be similar to comparing taxes and costs by taking a loan to spread the taxes vs pulling all funds and paying potentially much larger taxes.
As I mentioned earlier this would only apply to some people - just like advantage of Roth conversions and that planning would only apply to some people.

 

[Seevee]

One other thought and a different way to view this based on your comment here:
"Yes, there may be some tax advantages, but a lot of folks with good planning have minimized their tax obligations going into retirement."

When financially planning for retirement it is often a best practice to keep taxes as smooth as possible along all years. When planning to optimize taxes for potential actions like Roth conversions that can mean limiting draws of funds for Roth converts and accomplishing those over a number of years.
In some cases this would be similar to comparing taxes and costs by taking a loan to spread the taxes vs pulling all funds and paying potentially much larger taxes.
As I mentioned earlier this would only apply to some people - just like advantage of Roth conversions and that planning would only apply to some people.

Smitty447,


Again, a few good points. However, look at posts 98 and 99 that take the more conservative approach, which I could argue for.


Also, I could argue to NEVER make an investment decision because of a tax benefit... make decisions to profit. And, even worse would be a retirement toy because of a tax break. Sure, I can understand it, but I'd bet not for most of us.


Had some friends that went thru some of the things that Ted mentioned in post 98..... real estate during the 2008 drop, lost of pensions that were significant in the 2000 to 2010 range. They were smart enough to be prepared.



It DOES happen, so I could argue to be conservative and prepared.


No leverage on boats is not a bad idea .....

 

[KnotYet]

Something to ponder:

https://www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/

Great read, Murray.

I'm keeping my finger on the 'sell' key.

 

[mahal]

Paying cash for a boat is a good idea if it makes dollar sense as it did for me on my current boat. But paying cash for a boat if you get a higher return on your money than the interest on a boat loan is foolish and I'm sure that any financial advisor will agree.

If something happens to your income stream, pay off the loan.

Also when financing, you can always pay off the loan when the numbers change. An example would be that the return on your money has dropped to a rate lower than the interest you're paying on a loan.

A financial advisor that will tell anyone to buy cash because it's a toy instead of crunching the numbers to see which route is more money smart is not acting in the best interest of his/her client.

As some have mentioned already. Do the math.

 

[MurrayM]

Great read, Murray.

I'm keeping my finger on the 'sell' key.

Good plan...the stock market is no indicator of reality, it’s a bet (by those who hopefully can afford to lose) on what may happen in the future, and it could be argued that it’s mostly fueled by greed, and sometimes fear.

An interesting question is; how many businesses would have to fail, and how long after that would banks start to be adversely effected?

 

[Medic]

JLD said, " When we buy our boat, we will have a decent down payment, and likely finance the rest over over 5 years. No way I'm wasting 5 years of retirement waiting for the cash.

I think that is a VERY valid point. Would hate to be saving money for years only to be told that I had maybe three months to live.

Still, of course you must be prudent. I think at the very least I would want maybe a full year's PAYMENTS tucked away in a CD or something just in case I needed to sell the boat because of unforeseen financial circumstances a couple of years into my five year payment schedule.

 

[Art]

Something to ponder:

https://www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/

Read every word. I agree... described potential economic downturn is too likely and may become nationally/internationally disastrous.

U.S. and global economy is truly a feeble house of cards.

What happens to the intensities of this pandemic's social constrictions during the next six to twelve months will apply great weight toward relatively near future economic events and their outcomes.

My fear is there may become war between nations.

 

[KnotYet]

Read every word. I agree... described potential economic downturn is too likely and may become nationally/internationally disastrous.

U.S. and global economy is truly a feeble house of cards.

What happens to the intensities of this pandemic's social constrictions during the next six to twelve months will apply great weight toward relatively near future economic events and their outcomes.

My fear is there may become war between nations.

While there may be wars between other nations, the USA won't be one of them, IMO.
We will keep doing what we've been doing: making and selling weapons to both sides.

 

[smitty477]

Smitty447,


Again, a few good points. However, look at posts 98 and 99 that take the more conservative approach, which I could argue for.


Also, I could argue to NEVER make an investment decision because of a tax benefit... make decisions to profit. And, even worse would be a retirement toy because of a tax break. Sure, I can understand it, but I'd bet not for most of us.


Had some friends that went thru some of the things that Ted mentioned in post 98..... real estate during the 2008 drop, lost of pensions that were significant in the 2000 to 2010 range. They were smart enough to be prepared.



It DOES happen, so I could argue to be conservative and prepared.


No leverage on boats is not a bad idea .....

"Also, I could argue to NEVER make an investment decision because of a tax benefit... make decisions to profit. And, even worse would be a retirement toy because of a tax break. Sure, I can understand it, but I'd bet not for most of us."
This is not at all what I am posting about, its not about a tax break at all....
When we were considering another boat at the start of this year we looked into the tax affects of drawing existing money out of accounts to pay for it.
While we did not decide to get the boat we did learn that there are sometimes very clear advantages to getting a boat loan especfially in cases where this occurs at or after retirement. In my posts I have mentioned a few things that would be needed to make the math comparison and some of them were: no prepayment penalty, length of loan required, tax consequences of drawing the funds, % interest on propective loan.
In an example case you have the funds to purchase a boat , in the year of the purchase your taxes are high and any additional marginal income will incurr higher taxes, you could 'smooth' out the taxes by pulling funds over 2-3 years and incurr much smaller tax.
So if you would need an additional $300K for a boat transaction and this year the taxes would amount to 30%.
But if that same $300K was to be pulled from the accounts over 2 or 3 years and incurr 15% tax the difference would be:
300K need at 30% = $428K draw
300K need at 15% = $352K draw
$76K difference
The amount of time you would require the loan, the rate on the loan and any earnings on the amount left in funds untill payment on the loan would also be needed. In our case we would have used the loan for 11 months but I could see cases where 1-2 years would be best for 'smoothing' taxes on draws.

There are a number of calculator/software packages that can model transactions similar to this in an entire portfolio. Some of the better ones are sold for reasonable prices but there are also a few that are free if anyone would ever want to compare things like 401K to Roth conversions, fund placements, fund draws etc.
One that is free is IORP retirement calculator (use extended version) which is a linear calculator that can compare most of these failry quickly after some diligent set up and comprehension time. After set up we have used this to get failry quick comparisons on various scenarios.
Another good free calculator/spreadsheet is the RPM retirement calculator - this one requires a longer set up time and time to understand the variables
but gives great details, is fantatstic for Roth conversion and lumpy draws, and is easily used on subsequent runs after setup.


"Again, a few good points. However, look at posts 98 and 99 that take the more conservative approach, which I could argue for."
Again its not about leverage - the money is already there , it exists in total.


"No leverage on boats is not a bad idea ..."
Its not about leverage , its about the best draw strategy to optimize taxes on whatever draw you want.

 

[Art]

Keep your eye on predicted open "Fed" meeting today. Evidently this meeting will be very interesting regarding their potential for recreation of inflation that the Fed desires [evidentially says needs to be] reestablished.

Don't recall any open Fed meeting before. Federal Reserve meetings were previously behind closed doors... with, results let loose in news briefs thereafter.

FWIW and BTW... 1.06 million new unemployment claims submitted this week. Weekly average is consistently above 1M new claims.

"Sales Force" reached its highest stock price and promptly laid off 1,000 employees.

There is a distinct disconnect between the tens of thousand "money" [stock market's unsupportable value] handlers and the numerous tens of million unemployed and poverty level "money" [income] earniers.

Things are going to get real interesting!!

 

[MurrayM]

Yup...crisis creates change.

A couple years ago the Canadian federal government tried to introduce Bill C27, which would have given the federal government and federally regulated private companies/corporations the right to unilaterally and retroactively change pension plans. You can bet their intensions weren't to improve the plans for the benefit of pensioners.

About 6 years ago our union agreed to change pension structures with new employees and to have slower rates of pay increases to get the top rate of pay; the backlash was against changing things on people who spent their whole career planning a retirement scheme, only to have it completely changed (and not to their benefit) years or decades after they had retired.

Bill C27 died quickly due to that backlash, but it illustrates where the governments 'head is'...and that was pre Covid-19 with all the federal spending to support Canadians and the economy.

I've put in my retirement papers with a retirement date, but made sure I can back out on the last day if I have to. I'll be watching what the federal government plans are, and will keep working for another year or so if they try to reintroduce a variation of Bill C27 in a different light due to Covid-19 spending.

Luckily, I put in some wiggle room...parliament has been prorogued (don't ask me to explain!) and will be resuming about a month later than normal.

I'm fortunate in that I don't hate my job, and could work another year or so if I have to...however...I would much rather have the time to pursue things which have been lingering on the back shelf while my job absorbed a good portion of 5/7's of my life.

 

[Jim Cooper]

What if we had delayed until all the ducks were in a row..? No-one knows what is around life corners, as covid has proven. So, my message is don't wait until you retire. Get started if at all possible. And if your work commitments are too high to allow that at 60, you need to re-examine carefully your work life balance. You may not have asked for that type of advice, but, as a retired medic, I give it for free..! [/QUOTE]


Peter - good advice. My current work situation however, is not a bad gig. I'm a contractor for the Navy, working on a base in the Bahamas. Although I enjoy the work it's all about boating around here. I catch marlin, tuna, mahi and wahoo all year around and do some island hopping around central & northern Bahamas. So I'm already living the dream but will some day, in the foreseeable future, want to retire and do the Great Loop & then head down to the Caribbean. I'm not opposed to financing a portion of my retirement boat because deep down I know I'm fiscally conservative and would never finance anything that I couldn't already pay cash for. As some have noted, it's all about doing the math and coming up with the least costly option vs. risk you feel comfortable with.

 

[Peter B]

Peter B said...What if we had delayed until all the ducks were in a row..? No-one knows what is around life corners, as covid has proven. So, my message is don't wait until you retire. Get started if at all possible. And if your work commitments are too high to allow that at 60, you need to re-examine carefully your work life balance. You may not have asked for that type of advice, but, as a retired medic, I give it for free..!

Peter - good advice. My current work situation however, is not a bad gig. I'm a contractor for the Navy, working on a base in the Bahamas. Although I enjoy the work it's all about boating around here. I catch marlin, tuna, mahi and wahoo all year around and do some island hopping around central & northern Bahamas. So I'm already living the dream.

Point taken Jim, and thanks for replying. At least you took on board what I said. So I will just repeat one thing I said. You are indeed fortunate. And leave it at that.
Cheers, and don't leave getting that boat, and start doing your thing too much longer for reasons covered.

 

[AdkChris]

Doesn't it matter how much you will use the boat. If it is you main entertainment and or living quarters that you use all the time it makes sense to spend more of what you have. If it sits and rots 2 cents is 2 cents too much.

 

[Knot Thirsty]

Finally, I'm approaching my retirement age and have begun to seriously consider how much I want to spend on my retirement boat for extended cruising. I first thought the best approach was similar to buying a home - put down 15-20% and consider the monthly payment @ 20-30% of your net income. I then considered spending a given percent, say 20% of my retirement investment fund and finally, considered calculating what my total living expenses (less a boat) would be after retiring, and use the remaining funds/income to purchase & maintain the boat.

After much deliberation, I came up with the answer....the answer is....there is no right or wrong answer.

Congratulations on your milestone. I believe spending a comfortable amount on your trawler or motor yacht is one consideration but also realistically look at what could be foreseeable expenses and running expenses. I just spent roughly $23K putting in new aluminum fuel tanks for example. Orihinally I paid up for twin Cummins diesels but the efficiency of them and reliability is incredible. From first hitting the water in the spring until haul out they start in a couple revolutions. Friends with Single screw diesels seem to have to run at higher RPMs and use similar amounts of fuel let alone tein screws iffer substantial maneuverability advantages and have the added security of a back up engine. Compared to gas there really isn't any comparison and after having two gas boats blow up in our club, for the safety factors alone i would never look at a gas boat.
Now for complete transparency my boat is listed for sale on this forum...for personal reasons. No need to worry as I'm sure someone will buy it through my local broker ...most likely a lucky American that'll take advantage of rhe covid19 driven extra high exchange rate at its basically a 30% discount to my American neighbours currently but that'll change post USA election. I hope you see my logic above as being sound and non bias.
Good luck...enjoy...stay safe. Paul

 

[billdomb]

Might want to take a look at the O'Kelly's channed.

Some recent discussions along these lines.

https://www.youtube.com/channel/UCJ6tJAU-6N68ZhTRXyY0Tnw

 

[Capnal]

I told my kids that since I paid for their first 20 years they had to pay for my next 20. Silence

Yes; Admiral and I are really enjoying "THXKIDS IV", our 2010 Marine trader Europa 36!...and our 2015 Porsche Carrera, license plate "THXKIDS". Kids don't seem to see the humor though...

PS these days one can use somebody else's $$ very cheaply and easily make twice that interest cost back over the long haul, but granted, that's not for everybody...

 

[Bryant]

Retirement

If you're at retirement, don't finance it, write a check for it. If you can't afford to do that, you're spending too much.

Ted

Agree. If you are retiring then buy the boat that fits your needs that you can pay cash for. Plan on spending 10% of the boat’s value per year to own and maintain.