Via what what?
So a while back I alluded to a big project that C and I were working on. And that project is.....we are trying to find a way to save for retirement. Exciting stuff huh? And yes, I know we are in France and most retired people are currently living the high life, but I firmly believe that kind of money won't be around by the time we grow old. Kind of like what happened to people my parents age - they always believe social security would be there for them and now many of them will have to work until they are 70+ because they don't have enough saved up.
So I spent a ton of time trying to figure out what is the best way to save here, and came up mostly empty-handed. I'm pretty sure that the majority of French people haven't given their retirement a second thought, and so those kinds of products don't really exist yet in France (though some larger companies are now starting to offer a sort of 401K). Talking to various banks though, they all just suggested I put money in some of the low-interest savings accounts (gee, you're going to give me a whole 2.25% and there's a max amount of 6000€? Sign me up -those 6,000€ will sure get me far when I'm 80!) or otherwise invest it in stocks and bonds. Given the economy, that doesn't really interest me either, nor do the extremely complicated "assurance vie" plans offered by most insurance companies.
Another option was investing money in the US, or in an IRA over there, but with the way the US economy is, I didn't really find that too reassuring either.
So was does that leave?
Investing in La Pierre, or literally in "stones".
We aren't quite ready to buy the home of our dreams yet - but we do have enough money set aside to buy a smaller place. The problem is, neither of us want to be landlords. Given what we could afford, it just seemed like a lot of time and energy spent for not much money after taxes.
So now what does that leave?
Investing in a viager, which is sort of like a reverse mortgage in the US except it's between two people instead of one person and the government. Basically, the viager process lets you pre-purchase a home owned by an elderly person. You give them a lump sum called the bouquet, and then you pay them a pre-agreed upon monthly stipend until they die, at which time you become the full owner. And now's the part where you all gasp, or at least that's what everyone else has done every time we've mentioned it.
We've been accused of betting on someone's life, trying to take advantage of an old person, being greedy, etc. (Thanks friends and family, btw). I am sure there are people who go into these things hoping the person will kick the bucket asap so that they get a great deal. But we are specifically looking at this as a long-term investment. FOR RETIREMENT. Ie We are not hoping she dies anytime soon. And at least this way, she has some extra money to live off of each month.
People's next comments are then - but what if she lives to be one hundred? (she's 79). Then you will have paid much more than the apartment is worth! The most well-known example is that of Jeanne Calment - she signed a viager contract with her notary in 1965 at the age of 90. Which normally should've been a shoe-in right? Except Jeanne Calment lived to be 122 - and the notary died before her and his children were required to continue paying her each month in his place!
Obvious that's an extreme case, but that is why in a normal viager situation, people say you are betting on the person's lifespan, hoping they won't live a long time. But in our case, the apartment we are looking at is a second residence, used by a little old lady as a painting studio once or twice a week. And once she can no longer paint, we will be allowed to rent the place out as long as we pay her 15% more each month.
So I am happy for her to paint as long as she wants. And when she can't, we will either continue to pay the monthly stipend, or suck it up and rent it out, probably to American students (which would at least limit the risk that they end up squatting the place and not paying rent for two years). It's a nice little apartment too - it has a great layout and is in a quite neighborhood, so we could fix it up to be pretty nice.
But the fact that we have the option to rent it out was the clincher for me - in my mind, if she does live to be 100+, at least the rent will cover the majority of the payment and there is very little chance we end up paying out-of-pocket more than the apartment is worth. And then we would either sell the place and explore any new retirement options out there or reinvest it in a bigger viager.
It just seems to be win-win - she gets a little bit better quality of life (and a tax break on that income) and we get to acquire a bien in an affordable way, without having to borrow any money and pay thousands of euros of interest to a bank. And because the monthly rent is reasonable, we can still keep saving for our dream apartment at the same time.
So what do you guys think? Am I a greedy capitalist influencing poor C (as his family seemed to insinuate) or is this a way for us to save for retirement while helping a little old lady out at the same time?