A Tale of Two Families

It was retirement day for both George and Dave. For George, it was the best time of his life. He was retiring after a long career, with a great pension, beautiful wife, and all his debts which included his house were paid off. Over the years, George saved a significant amount of money. He had built a substantial nest egg for his retirement. He planned to travel with his wife and see all the places that he dreamed about when he was younger. The question may be how George is so fortunate in retirement. The simple answer is: he was very frugal and invested his money wisely. When George got married he purchased a house. It wasn't the biggest house, but it was perfect for him, his wife, and raising their two children. George took the advice of his father, who was a financial advisor. His father helped him create a savings plan for his retirement and he was an extremely knowledgeable and savvy financial planner. He showed George that there are many financial benefits of homeownership, which not only included equity appreciation, but also many tax advantages. He explained to George that he could deduct part of his monthly mortgage payment on his taxes. He showed George that some of the closing costs that he paid when he purchased his house could be deducted from his income on his taxes. He also had George take advantage of the benefits of writing off his mortgage interest, private mortgage insurance, and real estate taxes. George and his wife never moved, over the years they made many improvements to their house. Some of these were also tax deductible, such as when they added a new furnace, air conditioner, water heater, and windows. George's lifelong profession was in sales; he used one bedroom and his house as his office. Because he worked from his house a few days a week, he was also able to deduct household office usage on his taxes. By the time that George retired, his house was paid off and due to the tax benefits of owning a house; he saved well over $100,000 from the tax advantages of owning as home as well as having $250,000 in equity. It truly was the best of times for George and his wife.

Dave was the same age, had the same job as George, and was equally as successful; but it was the worst time of his life. He was not prepared to retire, but due to the company's policies that he worked for, he had to retire. Dave did have a monthly pension, but he failed to invest his money for retirement. Dave never bought a house, it always seemed to be cheaper to rent, but this was mainly because Dave never looked into the tax benefits that he would've received by owning a house. Dave and his wife are not going to be able to travel. They are going to have to work, most likely at much lower paying jobs. Dave never took advantage of the benefits of owning a house. Dave and his wife are broke. He just retired from a high-paying job, has little savings, and still has to pay rent each month.

The story of George and Dave is a fable, but these two different paths in life are happening all around us. Everyone wants to enjoy life, but sometimes you have to take a step back and look what's in the best interest of your family and your future. If you want to increase your odds of having a financially sound future, there are many other things you can do to ensure a brighter retirement, such as: creating a savings plan for retirement and purchasing a home for the tax advantages. These are just two of many different ways to help you enjoy a more prosperous future.

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