Some of us run comprehensive calculators to determine how much we need to afford the retirement of our dreams. Others live life with faith alone that we will arrive in retirement properly prepared. Yet neither approach guarantees success. None of us can predict all the events that will build our ultimate retirement.
How many were prepared for the Market Meltdown of 2007? Thousands of baby boomers had to alter their retirement plans unexpectedly. Sadly, many of these no longer see retirement as even being an option.
According to AARP, for example, the average baby boomer holds two-thirds of their net worth in their homes. When real estate prices collapsed, their dreams of retirement did as well. Million continue to face foreclosure or have already lost their homes. What many boomers perceived as the very lifeboat of their retirement became the anchor that dragged them back towards poverty.
How can you prevent this from happening to yourself? Diversification is the only protection. As long as your home represents the majority of your wealth, you risk catastrophic loss due to real estate market fluctuations. Conceivably, guaranteed protection would only be possible if your home represented a small portion of your overall net worth.
Today’s thought experiment, how frugal of a home could you retire in? So what are the options?
Living off the land -This is not for the squeamish or the lazy. It is the ultimate in frugal living and convenience-tax free, but it does come with a price, labor. This approach will require a completely different skill-set. If you are serious, check out this homeless survival guide for some good tips.
Being homeless you can live in or under public buildings and structures. Some of proven resourceful enough to find shelter in drainage pipes, tunnels, and caves.
Portable Living – Portable living gives you several low cost options to lodging. My personal preference would be a decent strong-hulled sailboat. Boats can be more frugal than you think. While the boat itself requires continued maintenance, it is hard to spend money when you are not on-shore! If the water is not for you, there are some great deals on used recreational vehicles from small pop-ups to the giant diesel pushers. Land or water, the price of these housing options can be extremely frugal or get out of control very quickly; tread lightly and be well-educated before committing.
Minimalist Construction – Minimalist homes come in all shapes, sizes and of a range of materials. Even old shipping containers are being turned into houses. Some amazing dwellings have been built in trees or on trailers. If you can find enjoyment in cramped quarters or spend the majority of your day outside this may be an ideal low-cost option.
Renewable Construction – If alternative living situations and the minimalist approach are not up your alley, there are frugal options to building your dream-home. While many look down on the idea of a home constructed of rammed-earth or adobe, the reality is these kinds of construction methods have housed our ancestors for thousands of years. In fact, earthen homes have proven their ability to outlast conventional stick-built homes.
Log cabins when properly constructed have also passed the test of time as have sod, bamboo and straw-bale construction. Just make sure your material of choice is suited to the environment in which you build. Some of these materials can be obtained for little or no cost. With sweat equity, some of these homes could be built for price of utilities, appliances and fixtures.
Reuse Construction – As cheap as homes are in Detroit (Another Thought Experiment), it is conceivable that the right purchase could be disassembled and all material reused in a location of your choice. OK, so this idea is a little extreme, but homes have been built from old wine bottles, tires, and yes, even from torn-down homes. The key here is free materials, the more you don’t spend on materials, the more you have to fund your retirement.
Existing Construction- Like Detroit, there are locations around the globe that have very low cost housing options. In the past I have considered Caribbean or Central American locations while some Eliminate the Muda readers have recommended Bali.
For some of us, leaving the U.S. is out of the question. Just because it cost hundreds of thousands to build an existing structure does not mean that you must pay full price. On the other hand, you could spend all the money (someone else’s!). If you could find the right multi-family housing unit, rents could cover your living expense. You may also enjoy the benefit of a positive cash flow to supplement your retirement income.
In the end, low or no cost house leaves you with more liquid assets to invest or finance your retirement living.
Readers: How about you; are you taking one of these approaches to frugal living or do you have another idea? If not, when you do need the money there will always be the reverse mortgage option!
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