How much to spend on retirement boat

[Jim Cooper]

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.

 

[Crusty Chief]

Yep, pretty sure you came to the right conclusion.

Cheers

 

[OldDan1943]

Hint: die just before the money runs out.

 

[O C Diver]

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

 

[JLD]

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

Respectfully, this may or may not be true.

It all depends on the income stream that one has post retirement.

In my own situation, I would have plenty of money to finance a boat as we have been planning for retirement for many years.

Jim

 

[MurrayM]

Then again, where do you intend to go, for how long, with how many needed to operate the boat? That will give you your answer, at least in terms of what kind of boat you need.

After that comes extras, like extra length, extra amenities, extra luxury, etc...

I'm retiring soon and our scrappy little 30 footer will be enough to explore as many nooks and crannies on BC's north and central coasts as possible (for up to two months at a time...we spend a lot of time anchored in awesome places to hike and beach walk) while our health is good.

 

[markpierce]

Unless one provides specifics such as expected retirement income and existing assets, and proposed cost of acquiring a specific boat, one cannot give an intelligent response.

 

[oscar]

Don't ask here. Ask a financial planner. A certified one who charges by the hour. NOT and I repeat NOT a "wealth manager" who gets a percentage of your money every year, and CERTAINLY NOT, repeat NOT one who makes commission on whatever financial instruments they get you in to.

 

[Codger2]

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.

 

[sunchaser]

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

+1

 

[Bacchus]

Don't ask here. Ask a financial planner. A certified one who charges by the hour. NOT and I repeat NOT a "wealth manager" who gets a percentage of your money every year, and CERTAINLY NOT, repeat NOT one who makes commission on whatever financial instruments they get you in to.

Best answer so far
Have them run #'s for your situation and then you get to decide.
Budget and decision to finance vs finance very situation dependent...
You already came to the correct conclusion - NO ONE RIGHT ANSWER

 

[O C Diver]

Respectfully, this may or may not be true.

It all depends on the income stream that one has post retirement.

In my own situation, I would have plenty of money to finance a boat as we have been planning for retirement for many years.

Jim

Millions of people in the USA got into trouble between 2008 and 2010 when they couldn't pay for things their income stream said they could afford. Many were retired or near retirement. Happens every time there's a recession. We have a bad addiction as a country of personally buying things we can't afford. We're impatient.

If your retirement income stream will allow you to afford it, then wait until you've saved enough money from the stream to afford it. If you will be to old by then, that's a sign that you really couldn't afford it. When you write a check for it, "You have to like it better than your money." When you finance it, your spending money that doesn't yet exist, so the expenditure doesn't seem to have a real impact or liability.

Don't finance deprecating assets (or atleast don't owe more money than they're worth).

Don't finance deprecating assets in retirement unless you want to start saying, "Welcome to Walmart."

Ted

 

[oscar]

We have a bad addiction as a country of personally buying things we can't afford. We're impatient.

Well, like a psychologist friend of mine once pointed out: "Think about it.... this country was 100% started by people who were willing to pick up and leave."

 

[Peter B]

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

+1

Like they said, even if it's not what you wanted to hear.

 

[Lollygag1]

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

 

[JLD]

Millions of people in the USA got into trouble between 2008 and 2010 when they couldn't pay for things their income stream said they could afford. Many were retired or near retirement. Happens every time there's a recession. We have a bad addiction as a country of personally buying things we can't afford. We're impatient.

If your retirement income stream will allow you to afford it, then wait until you've saved enough money from the stream to afford it. If you will be to old by then, that's a sign that you really couldn't afford it. When you write a check for it, "You have to like it better than your money." When you finance it, your spending money that doesn't yet exist, so the expenditure doesn't seem to have a real impact or liability.

Don't finance deprecating assets (or atleast don't owe more money than they're worth).

Don't finance deprecating assets in retirement unless you want to start saying, "Welcome to Walmart."

Ted

Respectfully, I again disagree except for the statement, "Don't owe more money on a depreciating asset than its worth."

Everyone's finances are different.

I get it that some members want to pay cash for everything. Other's are not adverse to financing when THEIR situation and their finances warrant. The right approach is whatever works for the individual.

Personally, with our house paid, daughter through college, and PLANNING for our retirement, my wife and I will have much more disposable income than any other time in our lives. 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.

Yes, our financial planning may be different from the OP. Or, maybe not. It is up to he and his wife to figure out what is the right thing for them.

To the OP, yes there is a right answer. However, you will not get it on this, or any forum. You need to study you finances and figure it our for yourself. If your are having difficultly, do what oscar suggest, and hire a financial planner.

Jim

 

[Art]

Once you have in some way checked... to make sure you will not go broke by owning a boat:::::

Purchase your boat with cash... or... maybe trade for something else you own and you no longer want but the boat owner does want. Be sure you don't trade something that could or would appreciate in value as years progress... because... your "new" to you boat will 99% surely NOT appreciate in value over the years.

Once you own the boat free and clear... prepare to annually spend thousand$$$ [ie. lots of money] on it, in it, around it and because of it until you either sell it or die. And, that's the truth!

When you sell it prepare to take at least somewhat of [or possibly a big] loss compared to how much you originally payed.

During the years of ownership: First, before completing the purchase, making sure it is the correct brand/model/size and in good condition boat for you... Get The Hell On It!!! And, enjoy the heck out of your days on it!!!!!

You only live once - Guaranteed!

Happy Boat Shoping Daze! - Art

 

[O C Diver]

Respectfully, I again disagree except for the statement, "Don't owe more money on a depreciating asset than its worth."

Everyone's finances are different.

I get it that some members want to pay cash for everything. Other's are not adverse to financing when THEIR situation and their finances warrant. The right approach is whatever works for the individual.

Personally, with our house paid, daughter through college, and PLANNING for our retirement, my wife and I will have much more disposable income than any other time in our lives. 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.

Yes, our financial planning may be different from the OP. Or, maybe not. It is up to he and his wife to figure out what is the right thing for them.

To the OP, yes there is a right answer. However, you will not get it on this, or any forum. You need to study you finances and figure it our for yourself. If your are having difficultly, do what oscar suggest, and hire a financial planner.

Jim

I understand everything you're saying, that doesn't mean there isn't risk to financing something you can't pay for.

You can't default on a loan you don't have.

Ted

 

[ScottC]

Don't ask here. Ask a financial planner. A certified one who charges by the hour. NOT and I repeat NOT a "wealth manager" who gets a percentage of your money every year, and CERTAINLY NOT, repeat NOT one who makes commission on whatever financial instruments they get you in to.

+1

I totally agree with Oscar's comment. There is generally no easy "undo" option for financial decisions of this size, so you need to make 110% sure you're making a sound decision the first time. There's no longer any margin for "oops" when you're on the cusp of retirement!

 

[sunchaser]

Most good financial planners will not advocate that retirees borrow money for toys. Especially in this era of underfunded pensions and financial uncertainty of most businesses.

Can one find a financial planner that advocates risk taking during these shakey times? Of course.

 

[smitty477]

I understand everything you're saying, that doesn't mean there isn't risk to financing something you can't pay for.

You can't default on a loan you don't have.

Ted

"I understand everything you're saying, that doesn't mean there isn't risk to financing something you can't pay for."
There are cases where it is not a matter of 'you can't pay for it' but rather that the tax situation would favor financing some of the purchase to smooth out the draw.
So the risk would be the same but somtimes favor a loan if the interest rates and taxes are considered.

 

[mvweebles]

The mortgage/house analogy only goes so far. Problem with a boat is twofold (a) Tough to sell, often takes years. (b) High maintenance/carrying costs. Combination of these two factors means loan payments become really distasteful to either the owner or his/her heirs. If 'borrow' is the route, some boats are better about retaining value - Nordhavn at the high end, some models of Mainship at the low end. Buy a good condition example at a decent price, keep-up the condition. While sometimes a premium to purchase, they are often the cheapest to own as resale is fast and relatively high value.

Peter

 

[O C Diver]

"I understand everything you're saying, that doesn't mean there isn't risk to financing something you can't pay for."
There are cases where it is not a matter of 'you can't pay for it' but rather that the tax situation would favor financing some of the purchase to smooth out the draw.
So the risk would be the same but somtimes favor a loan if the interest rates and taxes are considered.

So tell me what the financial situation of a person's portfolio will be if a candidate who has promised to raise income tax on the rich, capital gains tax on the rich, corporate income tax by almost 50%, and punishment tax on corporate profits over 100 million, gets into office? Tell me what that portfolio will look like if the country goes into lockdown again and some of the businesses in the portfolio go under? Tell me what the portfolio's dividend stream will look like with a 50% increase in corporate income tax?

Ted

 

[smitty477]

The mortgage/house analogy only goes so far. Problem with a boat is twofold (a) Tough to sell, often takes years. (b) High maintenance/carrying costs. Combination of these two factors means loan payments become really distasteful to either the owner or his/her heirs. If 'borrow' is the route, some boats are better about retaining value - Nordhavn at the high end, some models of Mainship at the low end. Buy a good condition example at a decent price, keep-up the condition. While sometimes a premium to purchase, they are often the cheapest to own as resale is fast and relatively high value.

Peter

We have not had much of a problem selling boats - but maybe we did not get the last 5% of price that was available.
If you have a choice between paying in full or a loan and it would require a good deal of taxes to liquidate the appropriate funds the solution becomes one of math with the loan rate and tax rates.

 

[smitty477]

So tell me what the financial situation of a person's portfolio will be if a candidate who has promised to raise income tax on the rich, capital gains tax on the rich, corporate income tax by almost 50%, and punishment tax on corporate profits over 100 million, gets into office? Tell me what that portfolio will look like if the country goes into lockdown again and some of the businesses in the portfolio go under? Tell me what the portfolio's dividend stream will look like with a 50% increase in corporate income tax?

Ted

Hello Ted - we are not purchasing a boat now but if we did our current years tax situation would drive us towards financing some part of the purchase.
In other years that would not have been the case.
Your abilities to see the future of taxes while also knowing the future of our portfolio is not something we are able to do.
In either case upon completion of this 'straw man' purchase the potential owners total net worth would be exactly the same save for the tax situation.

 

[O C Diver]

Hello Ted - we are not purchasing a boat now but if we did our current years tax situation would drive us towards financing some part of the purchase.
In other years that would not have been the case.
Your abilities to see the future of taxes while also knowing the future of our portfolio is not something we are able to do.
In either case upon completion of this 'straw man' purchase the potential owners total net worth would be exactly the same save for the tax situation.

I listen to what politicians promise their constituents. The future begins November 4th about 10 weeks from now. If I wasn't writing a check, I'd wait the ten weeks to see what might or might not happen.

Glad my financial planner is more conservative than.....

Ted

 

[Pete Meisinger]

Some "experts" say you may enter retirement with a car payment but should not have a house payment. Although I am no expert, I guess this kind of makes sense.

I think I would apply this philosophy to a larger boat, No Payments!

pete

 

[Fletcher500]

So tell me what the financial situation of a person's portfolio will be if a candidate who has promised to raise income tax on the rich, capital gains tax on the rich, corporate income tax by almost 50%, and punishment tax on corporate profits over 100 million, gets into office? Tell me what that portfolio will look like if the country goes into lockdown again and some of the businesses in the portfolio go under? Tell me what the portfolio's dividend stream will look like with a 50% increase in corporate income tax?Ted

Copy. We are all doing great under the current regime. I would hate to see what would happen if someone new took over. Sarcasm.

 

[SteveK]

Some "experts" say you may enter retirement with a car payment but should not have a house payment. Although I am no expert, I guess this kind of makes sense.

I think I would apply this philosophy to a larger boat, No Payments!

pete

Interesting. Assume loan is same amount, is there not a tax benefit with a home mortgage deduction?

 

[ktdtx]

It all depends on the income stream that one has post retirement.

that doesn't mean there isn't risk to financing something you can't pay for.

I agree with the -"it all depends on cash flow".
If you deplete your cash to buy a boat then there is the risk of not having enough cash. You need to keep some cash because your boat will need to be fed.


Keeping hundreds of thousands of dollars on hand rather than putting it in a boat should enable you to weather most financial storms and your money isn't all tied up in an not-too liquid asset.


And, as you approach retirement--time is a major factor.



Again--cash flow, income stream--where is it coming from, how secure. Also-personal comfort with debt. Everyone is different