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        Investor's Insight - Friday, January 6, 2006           
          "A Digest of Investment Opinion From the 
             World's Leading Financial Advisers"


Comment The Post Below...

by Scott Burns

Q: A while back you did a series of columns about unusual 
retirements, including living on a sailboat. My husband and 
I are avid sailors and have enjoyed Florida cruising vac-
ations for many years. We would like to do more extended 
cruising. I am 54 and a teacher with Florida state retire-
ment. My husband is 54, in civil service, and will be elig-
ible for minimal retirement in a year. Both of us would have 
our pensions reduced because of our age.

We have a waterfront home worth over $800,000 that we are 
thinking of selling. We would use the $600,000 equity to pay 
off all debts, including our 40-foot sailboat, and purchase 
a townhouse in a planned community for cash. This would keep 
us in the market. Would we be better off not paying cash for 
the townhouse and investing the money instead? Any other 
suggestions? -- R.B., Florida

A: If you haven't already, get a copy of Charlie Wing's 
"The Liveaboard Report" (McGraw-Hill, $16). It is based on 
a survey of live-aboard sailboat owners and includes four 
different budget levels of expense. It will help you with 
some of the boat-based decisions.


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I suggest that you avoid buying a replacement house and in-
vest the equity from your home. There are several reasons 
for this. You may be able to pay cash, but the townhouse 
will still have operating expenses. If you buy a $200,000 
townhouse, it is likely to have expenses of $10,000 to 
$12,000 a year. This expense would absorb the income return 
from another $250,000 or more. In addition, the townhouse 
will have to appreciate by 5 percent or 6 percent a year 
just to "stay even" with its operating expenses.

Yes, I know 5 percent or 6 percent a year seems a sure 
thing given Florida real estate appreciation in the last 
five years, but there is no guarantee that super-apprec-
iation will continue.

Another reason to forgo ownership is to liberate yourself 
from your current habits about housing. You may discover 
(1) that you like living aboard as a permanent lifestyle, 
(2) that your housing needs are much different after liv-
ing on a boat, or (3) that where you want to live has 
changed dramatically. So why go through all the hassle of 
buying and selling a house?

Many readers responded to the Living Lite series, which 
can be found on my Web site (www.scottburns.com) in the 
"readers" section. I don't think I came close to doing 
justice to the stories I heard. What I learned, however, 
convinced me that we have a lot more choices than we ex-
ercise. It also convinced me that the biggest lever on 
our well-being -- financial and personal -- is our per-
sonal decisions, not our investment decisions.

Q: My sister, 78, is moving to Dallas from St. Louis. She 
has been a widow for 30 years, has no children, and owns 
her home free and clear (worth about $120,000). She has 
no debt, still drives, and has inherited investments worth 
about $275,000. 

She is relatively healthy but had a slight stroke 12 years 
ago, has had a hip replacement and has had cataract surgery. 
Should she buy a house or live in a retirement community? 
She can't live with me or my grown kids. -- K.P., Dallas



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A: Start researching continuing care communities (CCC) and 
use your knowledge of Dallas to help your sister make a de-
cision. Continuing care communities are the retirement 
communities that offer a continuum of independent living, 
assisted living, and skilled nursing in the same complex. 
An upfront fee that may, or may not, be refundable guaran-
tees lifetime care.

There are many reasons to make this choice. The most im-
portant is that your sister is a prime candidate for a 
continuing care community. She is a widow. She has no 
children who can provide care. And she is fast approaching 
the age when the security of a CCC will be very appealing. 
She's also young enough that she can establish a broad net-
work of support in her new community because she'll enter 
it as a healthy person who is still driving a car.

Will she ever need assisted living or skilled nursing care?

Maybe. Maybe not. But she is a prime candidate. Men gener-
ally avoid both the hard way, by dying. 

(Investor's Insight reflects the opinions of experts. It does 
not recommend any specific investments, and no endorsement is 
implied or should be inferred. For more information, contact 
the individual firms cited).



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