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Old 10-14-2009, 09:27 AM   #1
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70%

Wow, if 70% is the norm, I am way, way out of sync. My home is no more that about 15% of my wealth (total assets) and I rarely take it into consideration when calculating my total available assets as I have to live somewhere so I just stick it into the back of my mind as a final asset to cash in before I go the the poor house. Is there still a poor house?

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The equity in your home represents a big part of your wealth. If you're married, your non-financial assets -- mostly the equity in your house -- represent about 70% of your total assets, according to a 2009 Society of Actuaries report "Segmenting the Middle Market: Retirement Risks and Solutions."
http://finance.yahoo.com/focus-retir...vingretirement
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Old 10-14-2009, 09:30 AM   #2
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Dang. For me it's only about 15% also, and we own it outright. We consider a personal residence a place to live and nothing more -- and certainly not an "investment". Rental real estate is an investment. IMO, the personal residence is not.
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Old 10-14-2009, 09:32 AM   #3
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Mine is a little less than 15% if I include my home's value in my net worth. I think the author must be thinking of Californians.
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Old 10-14-2009, 09:34 AM   #4
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Home, vehicles and other personal property are less than 10% of NW and are not considered as part of the pie from which 4% per year will be withdrawn for retirement expenses.
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Old 10-14-2009, 09:40 AM   #5
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Whereas mine is getting close to 60%. That was never the plan, but house prices just kept going up so fast it always dominated the net worth calculations. I cannot imagine spending so much on a house, but here I am holding one just the same. Makes me look at new neighbors with squinty eyes: you paid WHAT for that house
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Old 10-14-2009, 10:20 AM   #6
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The 70% is for median income couples, ages 55-64. The median annual income for a family of four is around $70k. "Assets" doesn't include the value of SS or a DB pension. The data is for 2007, a year when home equity was unusually high.

People on this board are probably above average earners, so they should have more savings (because SS is relatively less). Of course, we are also much better at LBYM and saving.

My home market value is about 11% of my net worth.
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Old 10-14-2009, 10:27 AM   #7
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The article gives this list of things that retirees could do with their houses:

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That said, here are the options you have to unlock the equity in your home:
  • Pay off the mortgage, if possible, to reduce overall expenses
  • Sell and downsize to a smaller home, freeing up funds for investment or annuity purchase
  • Sell your home, invest the proceeds and then rent
  • Secure a home equity loan or secondary mortgage on the house
  • Get a reverse mortgage
  • Rent out extra rooms
  • Rent out your primary residence and live elsewhere at a lower cost
  • Keep the house mortgage-free, and let its value serve as an emergency fund if needed
I think that all of them have been discussed in this forum.

I think the majority of people use the last option. The "emergency" they are worried about is long term care needs, and they figure one way to fund them is to sell the house and move into an assisted living or nursing home.
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Old 10-14-2009, 10:33 AM   #8
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Originally Posted by mickeyd View Post
Wow, if 70% is the norm, I am way, way out of sync. My home is no more that about 15% of my wealth (total assets) and I rarely take it into consideration when calculating my total available assets as I have to live somewhere so I just stick it into the back of my mind as a final asset to cash in before I go the the poor house. Is there still a poor house?
We sold our home in San Francisco and moved to Asheville, NC. This flipped us from our home equity being in excess of 50% of net worth to less than 20%. We viewed it as an asset diversification decision. We have to live somewhere and decided that we were no longer willing to pay the premium to live in the bay area.
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Old 10-14-2009, 10:41 AM   #9
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I'm also at about 15% (and I live in California). About 13% of my net worth is in home equity. It would be about 17% if I was to pay off my mortgage.
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Old 10-14-2009, 10:48 AM   #10
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Our home equity is only a tiny fraction of what we own (maybe 5% of NW). If we paid off the house, it would be about 15%.
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Old 10-14-2009, 11:30 AM   #11
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I am about 20 percent if included in my net...
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Old 10-14-2009, 11:40 AM   #12
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Mine is a little less than 15% if I include my home's value in my net worth. I think the author must be thinking of Californians.
As a former Californian I wonder if you mean % of assets rather than % of net worth. Most of my neighbors had a huge mortgage liability on their personal balance sheet and little net worth.
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Old 10-14-2009, 11:42 AM   #13
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As a former Californian I wonder if you mean % of assets rather than % of net worth. Most of my neighbors had a huge mortgage liability on their personal balance sheet and little net worth.
Now that you mention it, that sounds more realistic than my former statement. I can't imagine who the article must be referring to, then.
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Old 10-14-2009, 11:48 AM   #14
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A bit difficult to figure - our home equity is maybe 2% of our net worth, but that is with the rental property discounted about 25% for after-tax sale value. Also the only money we owe is on our home, as it is cheaper to borrow against your home than against a rental property. If I remove the debt from our home then it still represents less than 8% of after liquidation and tax-paid net worth.
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Old 10-14-2009, 12:12 PM   #15
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My home is about 13% of NW. So the question that comes to mind when reading an analysis like this is - how is the heck will this demographic ever retire?

DW was telling me horror story of relative that has been regularly dipping into their 401k for various reasons. With their recent refinance and cash out of equity on an older home they are pretty clueless when it comes to finances and won't listen to reason - so I keep quite. If this relative is in the majority - then a lot of folks are in for a rude awakening.

I certainly don't feel wealthy - in fact with the current financial markets I am in hyper LBYM out of fear. Maybe I should loosen up and enjoy more...

I've always heard "Eat drink and be merry - for tomorrow you may diet..."
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Old 10-14-2009, 12:19 PM   #16
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Now that you mention it, that sounds more realistic than my former statement. I can't imagine who the article must be referring to, then.
Florida allows Medicaid recipients to keep to keep their home -- they are 70%ers. I suspect the article refers to folks with limited savings, IRA and 401k money with some home equity. Small denominator, high percentage.
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Old 10-14-2009, 01:09 PM   #17
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20-25% for me. If I worked for a few more years it would be down to
15% or so....not going to. Rather live cheaply.
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Old 10-14-2009, 01:11 PM   #18
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Hmmm...about 13% for me. I don't include the pension or future ss...just funds and stuff in my hot little hand.
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Old 10-14-2009, 02:12 PM   #19
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About 25% for us, but we live in an expensive area of California. However, like others, we don't count it as part of our net-worth.
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Old 10-14-2009, 02:19 PM   #20
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We live in pricey SoCal, and our home equity is approximately 55% of our net worth. That percentage is helped along by the fact that the house value has appreciated by 115% since we bought it 10 years ago.

I do not factor the home's value into our net worth for FIRE planning.
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