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View Poll Results: How much $ do you have NOW: Holdings + Home Equity + (Annual Non-SS Pension*25)
0-250K 16 5.30%
250-500K 21 6.95%
500-750K 14 4.64%
750k - 1mm 33 10.93%
1mm - 1.25mm 29 9.60%
1.25mm - 1.5mm 34 11.26%
1.5mm - 1.75mm 20 6.62%
1.75mm - 2mm 28 9.27%
2mm - 2.5mm 36 11.92%
> 2.5mm 71 23.51%
Voters: 302. You may not vote on this poll

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Re: Annual "Watcha Worth" Poll
Old 03-27-2007, 10:14 PM   #61
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Re: Annual "Watcha Worth" Poll

It strikes me that one way to view home equity is to consider only the excess over the equivalent rental. If you didn't have the house, you would have rental payments, which would reduce your effective net worth by the amount needed to support that payment. Thus, for example, if you would expect to rent your current house for $2000 per month, you would need a nest egg of $600k (using a 4% SWR) to generate the income to pay that rent. If your home equity is above $600k, add the difference to your net worth. If it is less, subtract the difference. If you think you would sell and rent, plug in your new rental amount.

Just my $0.02.
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Re: Annual "Watcha Worth" Poll
Old 03-28-2007, 07:17 AM   #62
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Re: Annual "Watcha Worth" Poll

Quote:
Originally Posted by Gumby
It strikes me that one way to view home equity is to consider only the excess over the equivalent rental. If you didn't have the house, you would have rental payments, which would reduce your effective net worth by the amount needed to support that payment. Thus, for example, if you would expect to rent your current house for $2000 per month, you would need a nest egg of $600k (using a 4% SWR) to generate the income to pay that rent. If your home equity is above $600k, add the difference to your net worth. If it is less, subtract the difference. If you think you would sell and rent, plug in your new rental amount.

Just my $0.02.
That would really increase my net worth, and would push me up into the next category. But then, real estate prices are not rising proportionally with rent here in New Orleans, due to the big rise in cost of insurance. Mostly insurance is unavailable on the open market if you don't already have a policy, so almost all new homeowners are having to get the state sponsored insurance. The latter is over twice as high as the exorbitant rates of private insurance companies, by law.
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Re: Annual "Watcha Worth" Poll
Old 03-28-2007, 08:23 AM   #63
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Re: Annual "Watcha Worth" Poll

Quote:
Originally Posted by Gumby
It strikes me that one way to view home equity is to consider only the excess over the equivalent rental. If you didn't have the house, you would have rental payments, which would reduce your effective net worth by the amount needed to support that payment. Thus, for example, if you would expect to rent your current house for $2000 per month, you would need a nest egg of $600k (using a 4% SWR) to generate the income to pay that rent. If your home equity is above $600k, add the difference to your net worth. If it is less, subtract the difference. If you think you would sell and rent, plug in your new rental amount.

Just my $0.02.
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Re: Annual "Watcha Worth" Poll
Old 03-28-2007, 09:22 AM   #64
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Re: Annual "Watcha Worth" Poll

Quote:
Originally Posted by Spanky
The last three ranges may not be that useful. It might be more relevant for sites that focus on benchmarks on success, money ......... fortune or another other egotistic forums.
Where did that comment come from

This entire thread is for egos of all ranges of NW.
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Re: Annual "Watcha Worth" Poll
Old 03-28-2007, 12:51 PM   #65
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Re: Annual "Watcha Worth" Poll

I say housing equity is part of net worth. After all, we're talking about early retirement here, i.e. people who have 30 or more years to live out their lives. The idea that they are just going to die in the home they retire in is not realistic for the majority of people.

Statistics show that people change homes every 5-7 years. Whenever people sell a home, the home equity shows up... it is turned into cash even if just for a day or so to wend it's way through escrow to buy another home.



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Re: Annual "Watcha Worth" Poll
Old 03-28-2007, 01:16 PM   #66
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Re: Annual "Watcha Worth" Poll

Quote:
Originally Posted by HFWR
You're both right! :P

Strictly speaking, your "net worth" is assets minus liabilities. Thus, home equity is an asset, the mortgage balance is a liability.

On the other hand, like SteveR, I don't count is it as part of my "retirement kitty".
Actually, home equity should be calculated as follows:

Market value of home, less liquidation costs (the asset) - mortgage balance (the liability)
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Re: Annual "Watcha Worth" Poll
Old 03-28-2007, 02:39 PM   #67
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Re: Annual "Watcha Worth" Poll

The 248 respondents to this poll have a total net worth of approximately:

$360 Million Dollars -and this is a conservative estimate since I took the minimum amount for each category, and who knows how many 10Mil NW types are being counted as only a couple+. This is greater than the GDP of:

Timor-Leste $349 M
Vanuatu 341
Guinea-Bissau 301
Solomon Islands 286
Dominica 279
Tonga 244
Micronesia, Fed. Sts. 232
Palau 145
Marshall Islands 144
Kiribati 76
São Tomé and Principe 57

And if the NW's were more in the middle of those ranges rather than the absolute bottom, we'd pass up or be with the likes of Burundi, Gayana, Liberia and Antigua. When you think only a small portion of this board's membership responded, the implications are even more amazing. It's kind of amazing to see this little slice of just how rich America is, when a handful of them can get together and rival whole other countries. Glad I'm here!

Oh FYI, Bill Gates NW once rivaled the UAE's GDP, but now it's less than Kuwait's. Bummer.

....and yes I know I'm comparing balance sheet apples to revenue stream oranges, still think it's an interesting nugget.
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Re: Annual "Watcha Worth" Poll
Old 03-28-2007, 02:50 PM   #68
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Re: Annual "Watcha Worth" Poll

Quote:
Originally Posted by Laurence
And if the NW's were more in the middle of those ranges rather than the absolute bottom, we'd pass up or be with the likes of Burundi, Gayana, Liberia and Antigua. When you think only a small portion of this board's membership responded, the implications are even more amazing. It's kind of amazing to see this little slice of just how rich America is, when a handful of them can get together and rival whole other countries. Glad I'm here! ....and yes I know I'm comparing balance sheet apples to revenue stream oranges, still think it's an interesting nugget.


How much does it cost to form a country? Where do you apply? Laurence, you can be treasurer. Margaret, atty general. Jarhead for defense. Nords and REWahoo can share intelligence and homeland security. That leaves pres, VP, and chief of state.

I'll watch.
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Re: Annual "Watcha Worth" Poll
Old 03-28-2007, 03:07 PM   #69
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Re: Annual "Watcha Worth" Poll

Quote:
Originally Posted by tiredofwork
Actually, home equity should be calculated as follows:

Market value of home, less liquidation costs (the asset) - mortgage balance (the liability)
Owning a house is both an asset and liability. The assets are represented by the equity in your home. The liability is more subtle. If you are used to living in an expensive house, then you will tend to continue doing so, which will require future monthly cost. It's no different than if you have a disease that requires drugs that cost 2K/month.
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Re: Annual "Watcha Worth" Poll
Old 03-28-2007, 05:31 PM   #70
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Re: Annual "Watcha Worth" Poll

I counted about 50% of my home equity in my "watcha" estimate. I plan on using about half to build a smaller home (RV pod) on an adjoining 6 acres I own after the kids are launched.
What is interesting (nice) about CA real estate is that 50% is more than I paid 7 years ago.
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Re: Annual "Watcha Worth" Poll
Old 03-29-2007, 12:24 PM   #71
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Re: Annual "Watcha Worth" Poll

Quote:
Originally Posted by HFWR
You're both right! :P

Strictly speaking, your "net worth" is assets minus liabilities. Thus, home equity is an asset, the mortgage balance is a liability.
I agree with the accepted definition of Net Worth.


I would like to futher elaborate on the comments about inclusion of pension and home equity in the SWR calculation.

Perhaps there is some confusion between FIREcalc and SWR. FIREcalc is a tool to determine the amount of income required in retirement based on user input of expenses, pensions, Social Security, future sources of cash (i.e., sale of car, boat, stamp collection, inheritance, sale of realestate, etc.) portfolio allocations, etc, and uses these data to determine how much income is left to be funded from the individual's portfolio. Once this is determined, the SWR calculation is made and the results expressed.

The whole concept of SWR is based on matching future income needs to expected expenses using investment sources in a pre-defined allocation stategy to create an income stream that will off-set inflation while allowing a distribution of income of a defined percentage of the investment portfolio value over a defined period of time with a given percentage of probability of success based on prior market (stock and bond) history.

The calculations to determine a Safe Withdrawl Rate from someones investment portfolio uses only the investements within that portfolio and does not include either home equity or pensions as investments for use in the calculation unless these have been liquidated and invested in other financial instruments and included in the portfolio as investments

While FIREcalc clearly uses pension and other sources of expected income including future liquidation of asssets (home equity); the SWR calculator uses only portfolio data to derive the needed additional income sourced from the investment portfolio.

Just my $0.02

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Re: Annual "Watcha Worth" Poll
Old 03-29-2007, 02:00 PM   #72
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Re: Annual "Watcha Worth" Poll

FWIW, I included our home's value in the poll, but excluding it wouldn't have changed the answer.
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Re: Annual "Watcha Worth" Poll
Old 03-29-2007, 03:30 PM   #73
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Re: Annual "Watcha Worth" Poll

Quote:
Originally Posted by SteveR
Perhaps there is some confusion between FIREcalc and SWR.
On your part also.

Quote:
Originally Posted by SteveR
FIREcalc is a tool to determine the amount of income required in retirement based on user input of expenses, pensions, Social Security, future sources of cash (i.e., sale of car, boat, stamp collection, inheritance, sale of realestate, etc.) portfolio allocations, etc, and uses these data to determine how much income is left to be funded from the individual's portfolio. Once this is determined, the SWR calculation is made and the results expressed.
FIRECalc is not a "tool to determine the amount of income required in retirement", that job is left to the user and is best done using expected expenses. FIRECalc is a tool that determines the likelyhood (based on historical data) that a particular pattern of withdraws (i.e. cash flow) can be maintained for a given period of time from a particular set of assets thus it is a withdraw rate (WR) tool. As with any SWR tool, the person using FIRECalc needs to decide what likelyhood is safe thus adding the S to WR tool. Therefore FIRECalc is a SWR tool as much as any tool can be. FIRECalc is just more flexible it the type of assets it allows and the timing of their appearance in the asset base than the SWR tools you refer to.

Quote:
Originally Posted by SteveR
The whole concept of SWR is based on matching future income needs to expected expenses using investment sources in a pre-defined allocation stategy to create an income stream that will off-set inflation while allowing a distribution of income of a defined percentage of the investment portfolio value over a defined period of time with a given percentage of probability of success based on prior market (stock and bond) history.
No, the concept of SWR is determining what WR is likely sustainable for a given time frame from a given asset base, exactly what FIRECalc does.

Quote:
Originally Posted by SteveR
The calculations to determine a Safe Withdrawl Rate from someones investment portfolio uses only the investements within that portfolio and does not include either home equity or pensions as investments for use in the calculation unless these have been liquidated and invested in other financial instruments and included in the portfolio as investments
Then of what use is it? If you are not going to include pension/SS cash flows into your SWR calculations then over the course of your life your real (inflation adjusted) cash flow level will change (grow) as you get older and said cash flows kick in. FIRECalc uses the premise that the ERee wants a constant real cash flow level throughout his/her lifetime. And FIRECalc includes features that allow you to alter that if you want.

Quote:
Originally Posted by SteveR
While FIREcalc clearly uses pension and other sources of expected income including future liquidation of asssets (home equity); the SWR calculator uses only portfolio data to derive the needed additional income sourced from the investment portfolio.
I think your idea of an SWR calculator is not of much use to a prospective retiree. Someone getting ready to pull the plug needs to consider all cash flows and get them to relate to each other in the most advantagous manner to produce the cash flow required to cover said retiree's expected expenses.
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Re: Annual "Watcha Worth" Poll
Old 03-29-2007, 05:04 PM   #74
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Re: Annual "Watcha Worth" Poll

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Originally Posted by jdw_fire

...I think your idea of an SWR calculator is not of much use to a prospective retiree. Someone getting ready to pull the plug needs to consider all cash flows and get them to relate to each other in the most advantagous manner to produce the cash flow required to cover said retiree's expected expenses.
I never said FIRECalc does not consider all sources of inccome, on the contrary, what I said was "FIREcalc is a tool to determine the amount of income required in retirement based on user input of expenses, pensions, Social Security, future sources of cash (i.e., sale of car, boat, stamp collection, inheritance, sale of realestate, etc.) portfolio allocations, etc, and uses these data to determine how much income is left to be funded from the individual's portfolio. " This seems clear to me that FIREcalc uses a persons whole income potential from all sources. The statement included user input for expenses as part of the input for the FIRECalc tool. I fail to see how this does not address the uniqueness of each person's situation of expenses, income streams, investement portfolios and other potential sources of income in the determination of what would be the additional income stream needed by the individual that would need to come from their portfolio via the use of the SWR calculation.

It is understood that a person needs to know their expenses to determine their income needs. I never indicated it was not a key element in FIRECalc; it was clearly stated.

My SWR point was to show that the use of SWR; a tool within FIRECalc, uses portfolio investments and their allocation to determine the WR that is "safe" for the individual based on what they can withdraw from an investment portfolio with a defined asset allocation.


I would refer prospective retirees to the following studies and links to draw their own conclusions. http://www.retireearlyhomepage.com/restud1.html

Trinity Study and other studies discussion:
http://www.retireearlyhomepage.com/assetal.html

Have a nice day.
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Re: Annual "Watcha Worth" Poll
Old 03-29-2007, 06:32 PM   #75
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Re: Annual "Watcha Worth" Poll

Quote:
Originally Posted by SteveR
I never said FIRECalc does not consider all sources of inccome
I didn't say you did. The quote of mine you responded to was directed to your definition of an SWR calculator, not FIRECalc.

Quote:
Originally Posted by SteveR
My SWR point was to show that the use of SWR; a tool within FIRECalc, uses portfolio investments and their allocation to determine the WR that is "safe" for the individual based on what they can withdraw from an investment portfolio with a defined asset allocation.
And my point about your SWR point is that figuring SWR as you do above (without reguard to cash flows not related to your "investment portfolio") is
Quote:
Originally Posted by jdw_fire
not of much use to a prospective retiree. Someone getting ready to pull the plug needs to consider all cash flows and get them to relate to each other in the most advantagous manner to produce the cash flow required to cover said retiree's expected expenses
not just the SWR that an "investment portfolio" can produce in isolation.
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