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Old 08-07-2014, 11:49 AM   #41
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If you don't count the equity in your home, in your retirement calculations, but do count the cost of running/maintaining your home in your spending figures.... does it matter what percentage it is?...
No, it does not matter.

Some people may look at an expensive home as something that could be liquidated to reduce the living cost and to generate more investable cash, which opens other choices such as more travel for example. But if you are happy with where you are, it's a personal choice just like people who spend a lot on travel.
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Old 08-07-2014, 11:55 AM   #42
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So what is magic about 20% of networth being in a home? I'll admit I'm sensitive about this since mine is quite a bit higher.
Nothing. Debating about this is just another pastime for ERs.

Ha
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Old 08-07-2014, 12:11 PM   #43
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I will admit - having a lot of home equity does give me a good plan B and plan C if my retirement plans go south.

Plan B - downsize and get some equity out to fund more retirement expenses.

Plan C - cash out entirely if we both move into nursing homes. We can fund quite a few years of 2 people in a nursing home with our home equity.
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Old 08-07-2014, 12:43 PM   #44
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If you are paying rent or a mortgage when retired, then you will need to create cash flow to pay that bill. If that requires you to withdraw from a 401(k) or IRA, then that will add to your adjusted gross income which could put you in a higher tax bracket or make you lose tax credits or increase your long-term capital gains taxes or give you a bigger tax hit on your Roth conversions or a bigger tax hit on SS benefits or .

So if you can live the lifestyle you want in the place you want yet with a lower adjusted gross income, then your taxes will be lower, too, and possibly way, way lower.

As they say, "Run the numbers ."
This is part of the argument that Burns and Kotlikoff make in their 2005 book: Amazon.com: The Coming Generational Storm: What You Need to Know about America's Economic Future (9780262612081): Laurence J. Kotlikoff, Scott Burns: Books IIRC, B & K have a name for income which the gummint does not recognize (so does not tax) but IS generated by owning a home. It could be "implied" income, but I forget their actual term. Suffice to say, owning a home gives the owner the "value" of the equivalent rent. IOW one does not need to "earn" the money for this "rent". Fortunately, the gummint does not (yet) tax such implied "income."

While there are financial (and other) downsides to owning, B & K make their case with special attention to their belief that generational changes will (more and more) favor owning. You can accept or reject their conclusions, but their logic and documentation is impressive (to me).

Personally, we cover all the bases. We own (mortgage now paid) AND rent. Our "full time" home is owned and we rent a crash pad for our continuing forays back to the heartland. So far, it seems the right mix for us. YMMV
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