housing expense
In my current model, housing expense grows much more than I think is realistic and I wonder how I can change the plan. The model has housing expense growing to 100% of my income. Not a good plan!
property tax: My taxes are modeled to grow at the rate of increase of the value of my home. However I live in California where the taxes are not based on current value but on purchase price. So instead of growing to 4X the current amount to half the recommended spending, it should ideally grows by inflation or not at all.
Maintenance and condo fees: These don't seem to be affected by home value which I guess is a little strange to me.
RSS
carl at schwarczclark.com wrote:property tax: My taxes are modeled to grow at the rate of increase of the value of my home. However I live in California where the taxes are not based on current value but on purchase price. So instead of growing to 4X the current amount to half the recommended spending, it should ideally grows by inflation or not at all.
This is a good point and we didn't consider the case since California's property tax laws are an aberration when compared to the rest of the country. I doubt that we'll put any thing special for your case but there is always a chance.
My initial suggestion is that if you aren't planning on selling the house and since your property taxes won't grow ever while you own this house, you can simply use a 0% real growth rate. This will hold the property taxes and home insurance constant in real dollars (not a great idea for insurance) but you can solve THAT problem by including your insurance costs as a special expense and grow that at the real rate. That should get you most of the way towards something that resembles the state of affairs. Of course, you'll have to do a side calculation for estate tax purposes (value of house * CPI in the year of death) to figure out the bite your kids will pay when they inherit the house.
carl at schwarczclark.com wrote:Maintenance and condo fees: These don't seem to be affected by home value which I guess is a little strange to me.
Well the logic here is consistent, maybe wrong, but consitent. We treat maintenance like fixed price work at your garage. The price goes up year to year, but it tends to be more related to inflation than the actual cost of the house (car). A real example is, call a plumber to get a bathroom faucet replaced. Given the same faucet, it costs the same to replace, no matter the cost of the house. Call him next year and it may be more expensive, but the increase will be (more or less) related to inflation.
Same with condo fees. They may go up, but they (more or less) track inflation. And like the hack with the insurance costs above, both maintenance costs and condo fees are amenable to the same technique.
Best,
Dick Munroe
Well, I actually think primary home maintenance is much worse than that. The real costs increase over time as the building ages. :wink:
However, thanks for the guidance on using special expences to tweak the model. Feels like a hack, but one I might be able to use.
trvlr wrote:C. Texas, and perhaps other states, place a cap on property taxes at age 65, and the difference in tax cost could be substantial over a 20 or 25 year retirement. Certainly, it would be highly impractical to handle all the local variations. But perhaps the tax calculation could allow for a cap at a selected time with an independent growth factor to account for differences such as local bond issues which might not be covered by the cap. This would be much more in line with the rest of this very sophisticated program.
Gene
Another good idea. I'll toss this onto the list of possible enhancements (we do keep one). In our defense, we have to walk a fine line between additional complexity in the interface (adding more control over the planning process means adding to the UI, documenting how to use it, testing, and explaining it to people who didn't read the tutorial) and ease of use. The special expenditure/receipt mechanism is the generic escape clause in the product. It can be used to model pretty much everything currently in ESPlanner but we still have folders for Real Estate, Housing, Earnings, etc. because those screens make specific issues that come up most of the time easier for the user to deal with.
In general, expect additional controls when "a lot" of our customers might be able to use new folders/tabs, e.g., the Medicare B tab in the current release. We have ongoing arguments about this constantly since we have limited resources for development and have to pick our targets pretty carefully.
Best,
Dick Munroe