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Old 02-25-2021, 10:15 AM   #1
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Finance, Boats, Retirement how do you decide?

Hey all,

I know this has been discussed in specific ways (how much boat can you afford kind of threads), but I'm interested in a broader, more general discussion about how people approach understanding how boats (well trawlers?) fit into their financial plans.

I'm in my mid-40's and have been very fortunate. I started my career working for Crowley Maritime in Jax, Oakland, and Seattle. Left that to become an engineer, and somehow, as much by luck as by skill, anded up as a senior executive in engineering. What I suck at is finance.

Currently I live on Lake Champlain and just have a little Swift 30 trawler. Which is the perfect 5-6 month per year kind of boat for a family of 3 and a couple of dogs. Occasional longer trips out to the Atlantic, stuff like that.

But as my daughter gets older and ready to move out, my plan is to go liveaboard. We'll look to buy something bigger and more solid like a Kadey, maybe one of the bigger tugs, whatever. So some questions:

How do decide how much you can afford as a function of savings and income? or retirement? It's not like a house which likely appreciates. Do you just sorta look at a boat as a complete write-off in the sense of long-term finance? How do you budget living expenses? Fuel? Maintenance? and feel comfortable that you're within your income or retirement targets?

Do you have rules of thumb? I spend x percentage of my monthly on y? something else? Would love advice as my wife and I start getting ready to change things up a bit.

So I guess I'm sort of asking: How do you approach your overall finances with regards to owning or even living on a boat and make sure you're not going to far? or not far enough (and end up annoyed because you didn't buy a comfortable enough home)? Stuff like that. Any advice appreciated.

Also mods. If this should be in the finance forum, maybe move? Apologies if so.
Lastly. First post. Thank you all for this great resource. I've learned a lot reading this forum
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Old 02-25-2021, 11:21 AM   #2
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Greetings,
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Old 02-25-2021, 11:26 AM   #3
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I look at my boat no different than my land based home in that it has zero value unless I sell it.

Because of that my boat is not part of my financial plan. It is simply a trapped asset my son will have to deal with some day.
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Old 02-25-2021, 11:35 AM   #4
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My approach has always been, boats are a luxury item, not a necessity. All my boats were loan free purchases and not dependent upon income flow, except for maintenance, moorage and insurance. If income flow stopped, boat got sold, usually at a loss.
Also, once I make the boat mine, thereafter if I work on it more than use it, it goes up for sale.
On this cycle (pun) the boat is getting the greater attention with use and I keep looking at the parked Harley wondering if it is time to sell it, only rode it 1K last year. I don't like luxuries to sit unused, I am not a collector.
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Old 02-25-2021, 12:00 PM   #5
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Originally Posted by newt View Post
Hey all,

I know this has been discussed in specific ways (how much boat can you afford kind of threads), but I'm interested in a broader, more general discussion about how people approach understanding how boats (well trawlers?) fit into their financial plans.

I'm in my mid-40's and have been very fortunate. I started my career working for Crowley Maritime in Jax, Oakland, and Seattle. Left that to become an engineer, and somehow, as much by luck as by skill, anded up as a senior executive in engineering. What I suck at is finance.

Currently I live on Lake Champlain and just have a little Swift 30 trawler. Which is the perfect 5-6 month per year kind of boat for a family of 3 and a couple of dogs. Occasional longer trips out to the Atlantic, stuff like that.

But as my daughter gets older and ready to move out, my plan is to go liveaboard. We'll look to buy something bigger and more solid like a Kadey, maybe one of the bigger tugs, whatever. So some questions:

How do decide how much you can afford as a function of savings and income? or retirement? It's not like a house which likely appreciates. Do you just sorta look at a boat as a complete write-off in the sense of long-term finance? How do you budget living expenses? Fuel? Maintenance? and feel comfortable that you're within your income or retirement targets?

Do you have rules of thumb? I spend x percentage of my monthly on y? something else? Would love advice as my wife and I start getting ready to change things up a bit.

So I guess I'm sort of asking: How do you approach your overall finances with regards to owning or even living on a boat and make sure you're not going to far? or not far enough (and end up annoyed because you didn't buy a comfortable enough home)? Stuff like that. Any advice appreciated.

Also mods. If this should be in the finance forum, maybe move? Apologies if so.
Lastly. First post. Thank you all for this great resource. I've learned a lot reading this forum
Good questions posted here....

"feel comfortable that you're within your income or retirement targets?"
"How do you approach your overall finances with regards to owning or even living on a boat and make sure you're not going to far? or not far enough (and end up annoyed because you didn't buy a comfortable enough home)?"

Best method to view solutions for these questions:
1. Calculate your comfortable retirement needs
2. Ensure you have the comfortable plan covered well
3. Whatever is left in addition to the retirement plan can be spent on anything else.

If you should have questions about the best way to figure out a retirement plan there are various other sites that could/would help greatly.
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Old 02-25-2021, 12:51 PM   #6
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Unless you have a lot of steady retirement income, say from patents, rentals or royalties you really don't want a big boat payment. None at all is best for retirement.

I may be wrong, and if I am I'm sure the other, more experienced members will tell me in short order but here goes. I think the type of boat you are looking for will cost you about the same to purchase as a decent home in your area. I would further go out on a limb and say that it will cost you about the same to live on as that similar house.

The ten percent rule carries a certain amount of credibility here. (10% of the cost of the boat is about what it costs to maintain and use, annually)

good luck, welcome aboard

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Old 02-25-2021, 01:05 PM   #7
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Welcome aboard. As to what to spend on a boat, what works for me may not work for you. So I tend not to give advice on that since everyone’s situation is different. Good luck and enjoy the search.
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Old 02-25-2021, 01:39 PM   #8
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Originally Posted by Pete Meisinger View Post

I may be wrong, and if I am I'm sure the other, more experienced members will tell me in short order but here goes. I think the type of boat you are looking for will cost you about the same to purchase as a decent home in your area. I would further go out on a limb and say that it will cost you about the same to live on as that similar house.

The ten percent rule carries a certain amount of credibility here. (10% of the cost of the boat is about what it costs to maintain and use, annually)

good luck, welcome aboard

pete
I'd agree with the 10% for years 3 onwards. I've found that the initial costs to cater to our personal preferences much higher than a house for my newly purchased boat.

She doesn't like the fridge? He's OCD about the rat's nest wiring? These cost much more than a house.
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Old 02-25-2021, 01:52 PM   #9
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I'm a big believer in Cash Flow and keeping a cushion.
If you have a quality cash flow that will easily include a boat payment then it is OK. Many people in retirement keep their boat only for a few years due to a variety of reasons.


I reluctantly sold my big boat after making two 6 month trips thru B.C. to SE Alaska and was wife's turn for something else. The people I sold it to were excited to move aboard full time and a year later something changed and boat was for sale again.
The point being--I made monthly payments for 2 years and didn't have to commit a large sum of money at one time and the difference between boat costs for 2 years and my sale price was the cost of a total 12 month adventure.
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Old 02-25-2021, 01:55 PM   #10
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Wow. Great advice all around. Thank you all.
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Old 02-25-2021, 02:15 PM   #11
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Every time I talk to my CPAs about paying off the boat loan, they get real excited and I hear a collective concert of NO NO NO.
It is the only the only interest write-off I have.
I realize it would be a one year tax event but the CPAs all say NO NO NO.
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Old 02-25-2021, 02:34 PM   #12
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Quote:
Originally Posted by OldDan1943 View Post
Every time I talk to my CPAs about paying off the boat loan, they get real excited and I hear a collective concert of NO NO NO.
It is the only the only interest write-off I have.
I realize it would be a one year tax event but the CPAs all say NO NO NO.
How is a boat loan interest considered a write-off?
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Old 02-25-2021, 03:09 PM   #13
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We bought our boat and paid the loan off in just a few years and also have paid off the house. Could I afford better/bigger yup but don't want to have debt as I move towards retirement
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Old 02-25-2021, 03:28 PM   #14
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How is a boat loan interest considered a write-off?
My and no doubt your boat satisfies the IRS's definition of a 2nd home. Hey, the IRS writes the rules. I just follow the rules.

Years ago, I learned most boat owner's keep their boats less than 5(?) years and then buy a bigger boat or get out of boating so why spend your assets if you are going to change something in a short period of time.
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Old 02-25-2021, 04:00 PM   #15
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My and no doubt your boat satisfies the IRS's definition of a 2nd home. Hey, the IRS writes the rules. I just follow the rules.

Years ago, I learned most boat owner's keep their boats less than 5(?) years and then buy a bigger boat or get out of boating so why spend your assets if you are going to change something in a short period of time.

Do you still itemize your deductions (schedule A)?

My wife and I always itemized our deductions, but when they changed the tax code a few years ago, we found it more beneficial to start taking the standard deduction.

Jim
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Old 02-25-2021, 04:14 PM   #16
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Is your mortgage and retirement plan funded? If so, then work out how much boat loan you think you can afford.

Unless you plan on doing passages, I wouldn't focus on a passage making boat (e.g. Kady Krogen, Nordhavn, etc)
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Old 02-25-2021, 04:32 PM   #17
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Do you still itemize your deductions (schedule A)?

My wife and I always itemized our deductions, but when they changed the tax code a few years ago, we found it more beneficial to start taking the standard deduction.

Jim
To take advantage of some of the other rules, I still itemize as per the recommendation of my CPAs.
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Old 02-25-2021, 04:50 PM   #18
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Every time I talk to my CPAs about paying off the boat loan, they get real excited and I hear a collective concert of NO NO NO.
It is the only the only interest write-off I have.
I realize it would be a one year tax event but the CPAs all say NO NO NO.
Man, that makes no sense to me, but I'm no CPA.

Say you pay $5,000 in interest in a year, and that's a write off. So it would save you $1850 in taxes if you are in the highest tax bracket.

So, you are paying $5000 to save $1850?

Am I missing something?
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Old 02-25-2021, 05:07 PM   #19
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There's a guy on CruisersForum who publishes his cruising costs every month for past 4-years. He's on a 40-foot sailboat, spends time in Bahamas, mostly in Florida, and lives a pretty normal retirement lifestyle of eating out several times per month, traveling to see family, etc. His costs vary between $2500/mo and $5000/mo based on maintenance items and upgrade items, but averages around $4200/mo. Boat is paid for. Probably not a bad single number to work from.

You're young and you have kids for college. Depending on big of a windfall you hit, you still need substantial capital appreciation. Unlike a house, boat will not appreciate. A friend of mine bought his house in 2005 for $400k and is about to put it on the market for $1m. Now, he's done a ton of work so much of that is sweat equity, but I've done that amount of work on my boat over a similar period of time and the value hasn't really budged. I'm not saying houses are good investments, but I am saying that sometimes they are a great savings' account. Not so with a boat.

Unless you've really hit the lotto, it's a really hard decision. You will exit a lucrative career just as you enter your prime income earning years. And there's always the unknown of health insurance.

In the end, you will forego a lot of money. If/when you return to a house, you will likely have a much more modest lifestyle than if you had kept working. It really depends on your state of mind whether that's okay.

The flip side is there's no prize for being the richest stiff in the graveyard. Good luck.

Peter
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Old 02-25-2021, 05:15 PM   #20
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Man, that makes no sense to me, but I'm no CPA.

Say you pay $5,000 in interest in a year, and that's a write off. So it would save you $1850 in taxes if you are in the highest tax bracket.

So, you are paying $5000 to save $1850?

Am I missing something?

Maybe?

Being able to deduct the interest on the mortgage (boat loan) is only part of the equation. The other is what is the return that one would get on the money they have not invested into their boat?

If one paying 4% interest on their boat loan, but can make 5% interest investing their money elsewhere, financially it makes sense to finance the boat. Any tax savings would then be icing on the cake!

Jim
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