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Old 01-03-2013, 05:32 PM   #101
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Of course, the key is "net" worth. Mutual funds and equities are liquid and selling cost are minimal. If a house is 15% of total net worth and selling cost is 6%, that means net worth is overstated by as much as 1%.
I do agree that for change in net worth, sales and other costs are not meaningful.
Well, I think the "Net" actually refers to the "Assets minus Liabilities" equation, but I can see why someone would feel better lopping 6% off their appraised house value before including it in the assets column.

And someone can also add the resale value of their cars and recreational vehicles, jewelry at some lower than appraised/insured value, collectibles at eBay prices, cash under the mattress or buried in the back yard, hoarded gold, ammunition,.......

It all comes down to how closely one cares to track stuff.
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Old 01-03-2013, 06:31 PM   #102
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Net worth is up 36.6% for 2012, but I'm in accumulation stage.

Hoping 2013 will be as good as last year for us. Hit 1/4 million milestone in the middle of 2012. Project to FIRE at 52 (18.5 more years).
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Old 01-03-2013, 07:26 PM   #103
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Only up around 12% most contributions. Conservative , have cd's averaging about 3.8%
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Old 01-03-2013, 08:49 PM   #104
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Forget about should you include home value in net worth. What about the more pressing issue of whether we should pre-pay the mortgage at FIRE time or keep the mortgage and invest what we would use to pay it down? After all, that impacts your assets AND liabilities, so it could mean a huge difference to your net worth, however defined. What do you guys think about this more important question?
Well, keeping the mortgage does two things: (1) capture the difference between the mortgage rate and expected returns in the market. This is not guaranteed but I believe it to be positive by several percent. (2) preserves the option to walk away from the house (because it is underwater figuratively or literally).
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Old 01-03-2013, 08:51 PM   #105
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How do people determine the value of their homes for this calculation? Are sales and other costs considered?
I look at trulia and zillow and recent comps in the neighborhood. Then I "mark to market" based on that insights. This isn't a place to worry about getting right to the last dollar. Get it right within $25K and drive on IMHO.
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Old 01-03-2013, 08:57 PM   #106
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Oh boy. We're re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-hashing the payoff the mortgage early thing again.
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Old 01-03-2013, 09:08 PM   #107
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Oh boy. We're re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-re-hashing the payoff the mortgage early thing again.
Yes. Nobody cares what your net worth is, only that you (the reader) are happy. Biggest difference between Bogleheads and E-R.
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Old 01-03-2013, 09:32 PM   #108
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How do people determine the value of their homes for this calculation? Are sales and other costs considered?
Well, I have a very recent appraisal due to a refinance so I will use that appraisal. That said, we did a major improvement since the refinance that would add something to the value which I would estimate how much that would be (just based upon my recent familiarity with the market).

In our case net worth went down which I expected as it was a year of a lot of changes mostly due to buying a house and selling some other property.

The major factor in our decline in net worth was that 75% of the decline was attributable to income taxes owed on tax deferred money that we used to buy a house (no penalty - DH is retired).

In calculating net worth I think that most here add in the full value of their tax deferred accounts as if those accounts weren't tax deferred.

I know I did. So last year's number a year ago reflected that we owned no house at that time. I basically included the full value of our tax deferred accounts. During the year we bought a house and we sold some other property. After the dust cleared from the various things we did have an unusual amount of withdrawals from the tax deferred account which resulted in taxes owed. Theoretically paying those taxes is what most lowered our net worth. However, in reality those taxes (or the bulk of them) would have ultimately been paid when we withdrew greater amounts of money in future years. I would think that property in computing net worth you should estimate the tax deferred accounts less future tax liability.

The other 25% of the reduction in net worth was mostly related to things that we did as part of buying the new property that are one time expenses that didn't increase the value of the property (for example, putting in a fence). We also bought some new furniture which I didn't include as an asset (to determine net worth I included bank accounts, investments (including tax deferred), appraised value of the house, bluebook value for our cars. I didn't include the value of any other personal property although in reality some of it does have value but it is not enough to make a huge difference.

If we had estimated last years tax deferred accounts less future tax liability and I included the value of personal property (such as furniture) I would think our net worth between last year and this one would be almost flat.
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Old 01-03-2013, 10:17 PM   #109
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In calculating net worth I think that most here add in the full value of their tax deferred accounts as if those accounts weren't tax deferred.
It's not just tax deferred - it's any taxable asset that realizes a gain when sold. In the case of a tax-deferred account, the amount you pay in taxes is not at a fixed rate, but increases the more you pull out in a given year. Dealing with taxable accounts can get really complicated year-to-year as well, being highly dependent on the AGI of each year.

Ultimately it gets too complicated. The taxes you paid were actually an expense - not realized or due until you sold (withdrew) some of the asset. If your heirs had inherited the asset instead, they might have paid no taxes, or taxes at a different rate. So in general, future tax liabilities aren't calculated as part of net worth because they can't really be determined ahead of time.
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Old 01-03-2013, 10:49 PM   #110
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What if the money we think we have is not really ours, but the government's?

Perhaps they are just letting us manage it and deduct some living expenses as management fees?
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Old 01-03-2013, 11:28 PM   #111
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That is something I never pay any attention to. Who really cares? I could lie and tell anthing I wanted. Really a dull subject.
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Old 01-03-2013, 11:46 PM   #112
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That is something I never pay any attention to. Who really cares? I could lie and tell anthing I wanted. Really a dull subject.
Hey - don't rain on our parade please. We're enjoying ourselves here!
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Old 01-04-2013, 05:04 AM   #113
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NW up 39%. Still working and saving a lot of our gross income.

We are at the snowballing stage of wealth accumulation where our investment returns are starting to be more than our new contributions to investment accounts (and greater than our gross earned income in 2012). Hitting 20+% investment returns for 2012 helped with that snowballing.
We've hit this sweet spot, too -- net worth up just over 20%, including new savings/investments, growth on existing accounts, and real estate. Net worth growth was more than 2x annual income. We hit some major milestones in the 4th quarter of 2012, and just hit another one today. getting more and more tempting to cash out and call ourselves FIREd....
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Old 01-04-2013, 06:57 AM   #114
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What if the money we think we have is not really ours, but the government's?

Perhaps they are just letting us manage it and deduct some living expenses as management fees?
More truth to that than most of us would like to admit.
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Old 01-04-2013, 07:00 AM   #115
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It all comes down to how closely one cares to track stuff.
Yes.
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Old 01-04-2013, 07:31 AM   #116
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I know I will be whipped, but do you subtract taxes from tIRA's and 401k's balances ? You don't really own that money, and how do decided what tax rate to use.

My 7 year FIRE'd anniversary was yesterday, Ms G had to remind me.

I don't include my paid off ranch, and I didn't subtract taxes on deferred accounts, 9.2%.
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Old 01-04-2013, 07:46 AM   #117
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All you scorekeepers need to be sure you include the loose change under your sofa seat cushions...
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Old 01-04-2013, 07:49 AM   #118
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Sould net worth and YTD returns include deferred tax liabilities? This is a great question, right up there with "pay off the mortgage" and has the potential to keep us busy for years.
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Old 01-04-2013, 07:52 AM   #119
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I know I will be whipped, but do you subtract taxes from tIRA's and 401k's balances ? You don't really own that money, and how do decided what tax rate to use.

My 7 year FIRE'd anniversary was yesterday, Ms G had to remind me.

I don't include my paid off ranch, and I didn't subtract taxes on deferred accounts, 9.2%.
Happy anniversary!
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Net worth up for 2012 but life is what really counts
Old 01-04-2013, 08:03 AM   #120
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Net worth up for 2012 but life is what really counts

Going on my 4th year of retirement and had a very good year. While my Net worth is up 6% for the year I and my lovely wife our healthy and happy. We have a pension and SS coming in every month and money in the bank and IRA's. Trust me after being sick for the first 2.5 years in retirement your health is the most important NET WORTH!
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