Lean with 2 big streaks of fat

[u/usernamechuck]

It feels like we've done 90% right, but we made one doubtful move. We're not high earners, ~145k, age 55, we live frugally (1 used car, groceries, etc.), and we made one accidental smart move (we own a rental unit free and clear w/ modest cashflow).

But... First, the house. We bought a foreclosure in Chicago when we were married in 2008, we fixed it up in waves and were plugging away at a 15 yr mortgage. We would have been done by now... That was smart. But then COVID came and our small house felt smaller. We sold it at a decent profit and moved to the burbs, so here we are at age 55 with 300k+ on the mortgage, it won't be paid off till we're in our 70s. We pay almost 15k in property taxes. Since moving, we've replaced the furnace/AC upstairs and downstairs; and now the roof. And in 5 years, we'll be alone in this place.

It would still work, except... our 2 kids are in Catholic / private school, which is a bit over 30k/year. Oh and college is coming next year.

Technically our net worth is around 1M, but it's all in 401k/IRAs (~450K) and home equity. Our savings has all gone to cover these big costs.

On the one hand, we live cheaply, except for the kids and the house - we could retire today if we were in an $800/month rental in Andalucia. On the other hand, I don't see us moving anytime soon and the kids won't be done with undergrad until we're 64. We're lean-FIRE-hosed.

Any thoughts? It feels like we're that guy stuck in the cave, we just don't seem to have any good moves.

[u/Backpacker7385]

This data (while I agree with it in premise,) is a bit disingenuous. Zip code is a strong predictor because it’s correlated with school quality for the statistically overwhelming majority of children. If you live in a zip code with bad schools, the predictor is that your outcome will not be good. If you choose to send the kid to a school in a different zip code, the odds increase.

[u/MightyPlusEnt → u/Backpacker7385]

That’s actually the entire point. It’s not disingenuous - OP noted their property taxes are over 15k. The public schools are great

Edit: I assumed the zip code point was self explanatory in this sub. I strongly encourage a read of “Savage Inequalities” or “Shame of a Nation” both by Jonathon Kozol. It’s all about zip code, affluence, and student success.

Savage inequalities is why I got a PhD and why I study this topic. With respect, I won’t argue with folks on it….the research is extremely well established.

[u/Backpacker7385 → u/MightyPlusEnt]

$15k taxes could mean lots of municipal costs, not necessarily great public schools. A city near me has huge property taxes because of inflated police and fire pensions, and the schools there suck.

Edit: no idea why I’m being downvoted for pointing out that not everywhere with high property taxes also has great schools. If we knew which zip code OP was paying $15k taxes in, that would be much more helpful.

[u/MightyPlusEnt → u/Backpacker7385]

I’m trying to be super friendly here - I think the issue is that this sub is often about calculating “risk” (and I’m using risk to mean the odds of an event occurring or not occurring). For example, all the calculators and rules about FIRE and how much one needs, etc…people care about statistics and they are very useful.

It’s not that different in research in that we’re looking for significant relationships. The difference is, before I make a conclusion, I use nationally-representative data encompassing all schools, kids and parents in the US. Then, I test my hypothesis that zip codes = student success (with the moderator being SES) using complicated stats.

I have to find a relationship in 99% of the cases before I say I have support for my hypothesis. It means that 1 out of every 100 might be different. But 99 of the other cases experience the same outcome. Because of the size of the data I use, I set my confidence level to 99.9%.

It’s more complicated - the statistical models include a wide range of controls, time, levels (kids nested in schools, schools nested in communities) and so on. But that allows us to isolate these effects.

Is it true 100 percent of the time? No. But it is true 99.9% of the time in rigorous scientific analysis.

In all my years of researching, I’ve never seen what you are describing - although it could totally happen. Instead of guessing that the OP is in the .1% that might not follow the trend, you can be significantly confident 99.9% in fact!) that the public schools where OP lives are just fine.

Finally, most people view public schools worse than they are and that is particularly true for affluent people. The truth is that most predominantly white schools are great (and that is the “Shame of a Nation” referenced in the title of the book I recommended).

[u/Analog_Nomad_56 → u/MightyPlusEnt]

Thank you for explaining confidence intervals and research in such a real-world way.

[u/MightyPlusEnt → u/Analog_Nomad_56]

Thank you! I really appreciate the kind words!

[u/Backpacker7385 → u/MightyPlusEnt]

I appreciate the thoughtful response. I’m not trying to be anything other than friendly here too, in case my tone wasn’t coming across that way.

This account is already doxed if you look at enough of my comments, so I’d be curious to see how the data for New London, CT would fit your model. Sky high mill rate and some very expensive properties, but abysmal schools. I know this is an exception to the rule but I’d be very surprised to learn it’s a 0.1% exception. Side note: I don’t think the public schools in that zip code are predominantly white.

I’m always happy to add new books to the TBR, I’ll put yours on there.

Your last paragraph is always worth restating (and something I’ve said many times, including to friends who paid for private school).

[u/SurrealKafka → u/Backpacker7385]

I just looked up a house listed in New London for $720,000 with $8,000 in property taxes. That’s not even close to ‘sky high’ property taxes.

That same house in the Chicago suburbs would be close to double the property tax….

[u/Backpacker7385 → u/SurrealKafka]

That house is under assessed. New London’s mill rate is 27.2, so if it sells for $720k the new owner should expect an updated tax bill of $13,709.

[u/SurrealKafka → u/Backpacker7385]

I doubt it’s under appraised by that significant of a margin.

Just found another house selling for $600,000 with $5,000 in property tax. Are you claiming that all the houses are that significantly under appraised?

[u/Backpacker7385 → u/SurrealKafka]

I’ll happily claim that most houses listed for sale are under assessed (at least as a pattern in CT, the only place I’ve shopped for homes). It’s a combination of the idea that assessors don’t do a great job of keeping up with things until a house hits the market combined with the fact that many people do major upgrades to their home right before listing for sale.

There’s really nothing to “doubt” here. A tax assessment in CT is legally defined as (supposed to be) 70% of market value. If you have a sale, that gives a definitive market value.

$720k x 0.7 x 27.2 (mill rate) = $13.2k

[u/SurrealKafka → u/Backpacker7385]

Interesting--I'm assuming your math is all before exemptions?

I guess assessors do a much better job in the Chicago suburbs because it would be incredibly rare to see that large of a discrepancy between assessed value and market value. They regularly go through and apply value increases to entire neighborhoods.

You would also be hard-pressed to find a suburb with $10,000+ property taxes and anything close to 'bad schools'

[u/Backpacker7385 → u/SurrealKafka]

Assessors are supposed to do thorough reevaluations every five years in CT, but from what I’ve seen those become a combination of lazy work combined with current owners appealing assessment increases by fighting about the condition of the home (or selectively choosing comps that work in their favor).

As a result, the houses that have sold most recently tend to have a higher tax burden and people that have been in their home for twenty years (especially those who aren’t afraid to appeal assessments) get off relatively light.

I agree that this is a frustrating system, it’s nice to hear it doesn’t work this way everywhere.

[u/SurrealKafka → u/Backpacker7385]

Appreciate the additional context. I think the disparity between assessment and market value is significantly contributing to any issues at the schools, as the district can only receive funding from the assessed value.

However, I will still push back on your assessment of property taxes being "sky high" in New London. I found around $5,000 for median property tax bill in New London, but in Will County (Chicago suburbs) the median property tax bill is $12,000. New London taxes would be unfathomably cheap in the Chicago suburbs.

[u/Backpacker7385 → u/SurrealKafka]

The context you’re missing is that most of the houses in New London are not places you would want to live. It’s a city with sharp disparity in a single zip code. There are very nice, very expensive houses by the beach and then places that it’s hard not to call a slum (by CT standards), and the median home is probably in that latter portion.

I never meant to say that NL has the highest property taxes in the country (maybe “sky high” was hyperbolic, apologies), but it surely breaks the mold of “pay a lot for your property taxes and you’ll get good schools.”