The recent Supreme Court ruling that upheld the right of a city government to take away people's homes and give them to a private developer has given a bad case of the jitters to a number of Answer Desk readers, including Kevin, a recent home buyer in Florida. While the chances of losing your home this way are still pretty slim, it doesn't hurt to be prepared.
Scott in Virginia, meanwhile, is trying to come find a retirement calculator on the Web that will help put him on "Easy Street" when he quits working. But he's not sure the numbers add up.
Since the Supreme court ruling on Kelo v. City of New London I have been wondering how they calculate "just compensation"… We are concerned a developer is going to want to buy our whole neighborhood since it is mostly low income and mobile homes. It is directly behind (a neighborhood) in which the houses start at $1 million or more. Even building mediocre scale apartments will generate more tax revenue than the 50 or less mobile homes … If your mortgage shows you owe $100,000 can you be compensated for LESS than you still owe? … What happens even if they give you enough to pay off your mortgage, you still have to have money to move, and a down payment for a new home. What if you are on a fixed income with minor savings and they take your land on you only have five or ten thousand left over after your mortgage is paid off? What then?
Kevin B., Panama City Beach, Fla.
A lot of people -– including the four dissenting justices in -- share your concern. And while it may be premature to pick out a tree to chain yourself to when the bulldozers show up, it never hurts to be prepared.
The process of taking private property – known as “eminent domain” – has a long history. Though the U.S. Constitution guarantees that private property can’t be taken “for public use without just compensation” the definition of “public use” has changed over the years. In the past, property has been taken to build railroads or highways. But with cash-strapped cities and towns looking for new sources of tax revenue, some have decided that developments that generate higher taxes fit the definition of “public use.”
The case that has riled property rights advocates involved the city of New London taking property from homeowners for a development that would generate higher tax revenues. Some homeowners didn’t want to move and sued. In a recent 5-4 ruling, the Supreme Court sided with the city, raising fears that no one is safe from the threat of a developer tearing down their home to build a big box retailer or another cluster of McMansions.
But before you start digging a trench in the front yard to defend your home, consider the barriers that remain in place to slow down any government agency that gets ideas about seizing your property. The recent high court ruling also upheld the idea that state and local governments have the ultimate authority over the taking of private property, including the regulations spelling out when it is –- and is not -– okay to do so. Some states (Florida is one of them) have passed laws barring towns from taking property and handing it over to developers unless the neighborhood is “blighted.” The court’s decision also generated to blunt the impact of the ruling.
Even if your town government decides that a cluster of pink trailers is “blight” and wants them replaced with McMansions, you still have a few cards in your hand. First of all, if you and your neighbors make enough noise, the town may back down. Condemning private property is not a politically popular move because it makes other voters nervous. Even if the government goes ahead with a condemnation order, you can appeal it. And if a judge and jury side with you, you win.
In the relatively rare case in which you lose your property, you still don’t have to take what the government offers you. When it comes to valuing a property, the only true way to know its worth is to sell it. In the case of a taking, that’s not possible. So the government will hire an appraiser.
Appraisers have fairly wide latitude in the value they come up with. At the very least, you’ll want to hire your own expert, along with a good, local attorney who specializes in eminent domain cases. (In Florida, if the government tries to seize your property, it also has to pay your legal fees.) You’ll have several chances during the condemnation process to negotiate a settlement. You can, and should, ask for relocation expenses. If you still don't like the offer, you can go back to court. Somtimes, even the threat of a suit (which will add to the government’s cost) can help boost your home's "fair market value."
And if you ever get that far, the more homeowners you can get to join you the better. So once you get settled, throw a block party and find out if any of your neighbors share your concerns. Subscribe to the local paper and keep up with news of any proposed developments. Go to public meetings. At the first sign that you might be sitting in the way of development, get a lawyer.
In the meantime, go ahead and start fixing the roof and sheet-rocking those old walls. If other homeowners around you start sprucing up their houses too, you may soon find yourself in a much more "upscale" neighborhood. That should keep the town from getting any ideas about taking away your new house.
I'm looking for the best retirement calculator on the net. The ones I've found answer most of the questions based on today's situation and expectations. I'm hoping there's one that can help tell me, for example, what percent of my income I should save over time in order to achieve a financial goal. Fourteen thousand a year into a 401k today is next to impossible, but 5 to 7 years from now will not be once I get a few raises. But will that get me to Easy Street?
Scott H. -- Richmond, Va.
Retirement calculators will only get you so far: all they can do is crunch the numbers you put into them. Most of those numbers are going to be assumptions -- about what you'll need and how well your investments will perform -- that are really unknowable. The younger you get started on a retirement plan, the easier it is to make it work. But the longer your time horizon until retirement, the less reliable your assumptions will be.
But let's not get ahead of ourselves here: you're just getting started. At this point, it's okay if the numbers you plug into the calculator are just guesses. You'll no doubt go back and tinker with your plan many times before you're through. The most important step is the one you've made: getting started. So here are three things to think about as you search for that "perfect calculator:"
Your goal: This is probably the hardest of all. What, exactly, does "Easy Street" mean for you? A McMansion in the suburbs with three cars in the garage? A house in the woods and a trip someplace warm every year? Any chance you'll be putting kids through college? The best you can do is make up a fantasy retirement budget, decide when you plan to quit working, come up with a guess for how much income you'll need, and then work backwards to the present. You may have to adjust that goal downward. Or you may have to save harder. The purpose of the exercise is to see how these two numbers are linked.
Investment performance: There is, in fact, no way to calculate how well your investments will perform. But coming up with a target number helps you check your plan periodically to see if it's working. Forecasting your return also forces you to answer one of the most basic questions of investing: how much risk are your comfortable with? Riskier investments sometimes (but by no means always) bring higher returns. You're also able to take more risks if you've got more time: a 30- or 40-year horizon will likely smooth out the ups and downs of your investments. If you plan to retire in 5 years, taking on higher risk may not make as much sense.
Inflation: This is the ultimate wild card. And it's a question even Mr. Greenspan won't be able to help you with: there are just too many unpredictable forces out there. Inflation also hits your retirement plan two ways: 1) you'll need more money to pay higher prices when you retire and 2) it erodes the value of your investments along the way. And if you're planning on retiring in 30, 40 or 50 years, the cumulative impact can be enormous. Again, give it your best guess and expect to adjust your plan it the real rate of inflation differs from your forecast.
All of these numbers, along with your income and financial responsibilities, will continue to change throughout your lifetime. So you’ll need to continue to update them to keep your retirement plan on track. But you've got to start somewhere. Make your best guesses now, and then check your plan at least once a year.