Net worth change since 1-1-2012, the real question !

[BrianB]

13.7% We have paid off our mortgage and don't count our town home as an "asset" or part of our net worth.

I believe that an asset is something that puts money in your pocket, and a liability is something that takes money out of your pocket. A primary residence is in that second category, in my opinion.

If we sold & purchased another residence we would not have the money, if we sold & rented we would need the $100k+ to generate the income for rent.

 

[audreyh1]

A house is part of your net worth worth whether it generates any income or not. Once you and spouse pass, your heirs will happily sell it for financial gain. When you sell it to buy another one, you will definitely see a "worth" appear in terms of financial transactions.

I suspect for most folks, they assumed no real gain for their home unless they had some concrete evidence otherwise. Thus the house would have been a drag in their % increase in 2012. We're not comparing totals here, just gains.

Now, just because a house is part of one's net worth, doesn't mean one should count it as part of the assets for a retirement fund and thus annual withdrawal rates. That may be the source of confusion.

If you just want to count growth in total "liquid" assets, fine. But your house is still part of your net worth.

 

[donheff]

Now, just because a house is part of one's net worth, doesn't mean one should count it as part of the assets for a retirement fund and thus annual withdrawal rates. That may be the source of confusion.

+1. We have argued about whether to include home value in net worth in countless threads. To me it is a useless argument - the definition of net worth includes all assets - all liabilities so it counts. So in this thread I guesstimated the impact of home value on my gains for the year. But it is a completely academic exercise since portfolio value is what counts for withdrawal purposes. I do view the equity in my weekend house (and maintenance costs) as a potential bailout source of funds if things go south. But otherwise, the houses are just a source of annual expenses.

 

[imoldernu]

Am totally delighted with a reduction in net worth of 3% for 2012.

Net worth. A corporation's net worth is the retained earnings, or the amount left after dividends are paid, plus the money in its capital accounts, minus all its short- and long-term debt. Its net worth is reported in the corporation's 10-K filing and annual report.

Net worth may also be called shareholder equity, and it's one of the factors you consider in evaluating a company in which you're considering an investment.

To figure your own net worth, you add the value of the assets you own, including but not limited to cash, securities, personal property, real estate, and retirement accounts, and subtract your liabilities, or what you owe in loans and other obligations.

If your assets are larger than your liabilities, you have a positive net worth. But if your liabilities are more than your assets, you have a negative net worth. When you apply for a loan, potential lenders are likely to ask for a statement of your net worth.

Dictionary of Financial Terms.

It puzzles me that there seems no standard here for definition of net worth, or for income. If we ignore Social Security as a source of Income in one thread, but include it in another, it seems that it adds to confusion.

As an example... since beginning to accept Social Security at age 62, we have now collected (in today's dollars) about $350,000, a fairly significant amount, when one is not earning a salary.

 

[MichaelB]

How do people determine the value of their homes for this calculation? Are sales and other costs considered?

 

[audreyh1]

How do people determine the value of their homes for this calculation? Are sales and other costs considered?

Whatever the number is, it's probably out of date.

Since this thread just asked for change in net worth, the house thing shouldn't matter that much. Perhaps in future comparisons, the OP should ask for growth in net worth not including the house.

Some people probably just use the tax assessor value for their property taxes. Depending on where you live, those can be quite conservative.

If you are asking whether to include the costs associated with selling your house - no, just like you don't include the costs associated with selling your liquid assets (taxes, etc.). That's not how net worth is calculated. Costs associated with owning/maintaining a home are part of annual expenses, and aren't counted until they are spent.

I have my house value in Quicken, and have for many years. When I sold one in 2005, I put the money in a mutual fund where it appreciated until I bought another. When I bought another in 2010, I put a [very conservative] estimate back in Quicken.

 

[donheff]

How do people determine the value of their homes for this calculation? Are sales and other costs considered?

I keep a conservative estimate of home value in my portfolio and net worth spread sheet based on similar houses that sold a couple of years ago. For this thread I made a guesstimate based on media reports (and observations) that home prices in my area have gone up over the course of 2012. But it was just for guessing -- I didn't bother to change the number in my spreadsheet. The numbers I carry are more for keeping in mind a rough, conservative figure of what would happen if DW and I die more than anything else.

 

[audreyh1]

Am totally delighted with a reduction in net worth of 3% for 2012.



It puzzles me that there seems no standard here for definition of net worth, or for income. If we ignore Social Security as a source of Income in one thread, but include it in another, it seems that it adds to confusion.

As an example... since beginning to accept Social Security at age 62, we have now collected (in today's dollars) about $350,000, a fairly significant amount, when one is not earning a salary.

Huh?

Add up your bank accounts, your investment accounts, your real assets; subtract your credit card balances, any loans outstanding.

If you had saved all of the $350,000 you received in SS (i.e. not spent any of it) then it would definitely show up in your net worth. But money already spent or borrowed is not part of one's net worth.

 

[REWahoo]

Heh. A "net worth calculation" thread and the year is only three days old.

Anyone want to lay odds on when the first "pay off the mortgage early" or "take SS at 62 or wait" threads will show up?

 

[audreyh1]

Hey, someone wanted to know people's net worth change in 2012. Not surprised such a thread shows up right after "how did your investments do in 2012". Normal start of the year stuff.

 

[imoldernu]

How do people determine the value of their homes for this calculation? Are sales and other costs considered?

We estimate the net value of our house, and have included the cost of selling as well as the revaluation of real estate. Two years ago we reduced the asset value by 25%, although that was a little steep for our area.

Once we get beyond portfolio value, we also look realistically at the value of other personal property and assets. Thus, our small annuity is calculated at surrender value, jewelry at about 20% of insurance value. On a personal basis, for our macro calculations, we ignore the value of miscellaneous goods, cycles, boats, electronics, and household furniture and appliances, even though in total, the replacement value would be substantial. From experience, watching others in our senior community liquidate their household goods, we realize that conversion of belongings, to cash, is problematical.

 

[imoldernu]

If you had saved all of the $350,000 you received in SS (i.e. not spent any of it) then it would definitely show up in your net worth. But money already spent or borrowed is not part of one's net worth.

Perhaps you missed the point I was making about "income"... which along with net worth, often gets into our discussions, in a confused manner.

 

[HFWR]

Old 401k from megaconglomocorp, the bulk of my investments, up ~11%.

NW, who knows...

 

[bondi688]

I think that is why it is not that useful to talk about net worth changes instead of just looking at liquid investments gain and loss in just getting a more precise, although incomplete, sense of how the last year went. It is almost impossible to figure precisely the value of the house, the car, jewelries, electronics and other personal effects and their inclusions will just muddy up the computation.

 

[Alan]

Perhaps you missed the point I was making about "income"... which along with net worth, often gets into our discussions, in a confused manner.

I didn't understand your comment about some people not counting SS as income. I understand that some folks who are not receiving SS may not add it into future calculations, but once you are receiving, it is income, how can it be otherwise?

 

[Major Tom]

I don't own any real estate, so my NW is the value of my investment portfolio.

This is a very useful exercise, and I thank frayne, and this forum in general, for encouraging these types of assessments. I'm finding it useful for ignoring the "noise" that occurs from following market movements on a frequent basis.

This was the first full year that I have been withdrawing from my portfolio (and not adding to it), and it still managed to increase in value by 9.67% which I find quite encouraging.

 

[Southern Geek]

How do people determine the value of their homes for this calculation? Are sales and other costs considered?

I use value as computed by Zillow. I've found their info to be more timely and 'accurate' than the assessment that the county uses for tax purposes. Their methodology also seems to be more consistent.

Quicken shows my NW up 12.7% for 2012.
2012 was my last year of employment. I retired early on January 1, 2013 and have already received my first pension payment.

 

[Alan]

Quicken shows my NW up 12.7% for 2012.
2012 was my last year of employment. I retired early on January 1, 2013 and have already received my first pension payment.

Feels good, doesn't?

Congratulations on your retirement

 

[Lagniappe]

Liquid net worth up 33.69% for the year. It was my last year working and I had an unexpected repayment of a large personal loan that I had treated as a gift, so I probably won't see that kind of increase again.

 

[NW-Bound]

I do view the equity in my weekend house (and maintenance costs) as a potential bailout source of funds if things go south. But otherwise, the houses are just a source of annual expenses.

+1

I occasionally entertain the idea of selling my 2 homes, then drive off in my RV with 1/2 of the proceed in gold coins, the other 1/2 in a triple-leveraged ETF. Yeah, a two-position portfolio! Don't they call that a barbell strategy? No more messing around, and fewer things to maintain.

Wife would not be for it. But then, I am now learning to do more cooking, and just made chili jelly for the first time, and also different types of terrine. It's hard to do that in the cooking space of a 25' RV, which also has no room for my stash of booze, which may be growing as my rate of acquisition far exceeds my consumption rate. So, my boondocking fantasy may never get realized.

Just joking!

Heh. A "net worth calculation" thread and the year is only three days old.

Anyone want to lay odds on when the first "pay off the mortgage early" or "take SS at 62 or wait" threads will show up?

I did try to add variety like music, food, drink, and travel topics. Come on, my fellow [-]geezers[/-] retirees! Retiring, early or late, should be about more than money!

 

[imoldernu]

I didn't understand your comment about some people not counting SS as income. I understand that some folks who are not receiving SS may not add it into future calculations, but once you are receiving, it is income, how can it be otherwise?

Yes... that's what I meant... Often, in the same thread, discussions about "income" in retirement get mixed up, with one person talking about an income, (for instance) of $50,000/yr, while another person includes SS and quotes $65,000/yr. When planning our retirement, if we had not taken Social Security into account, I would have continued to work the extra three years... to age 65. As it turned out, with inflation staying low, it was the right decision.

I feel badly that so many younger people look at the future as if SS will not exist when they retire.

Of course, almost all discussions here seem to look at SWR as cast in stone... and that appears to be safer. We chose to plan on the decrement of capital, rather than a continued income stream. Perhaps a nuanced calculation, but one that we feel comfortable with.

 

[audreyh1]

Liquid net worth up 33.69% for the year. It was my last year working and I had an unexpected repayment of a large personal loan that I had treated as a gift, so I probably won't see that kind of increase again.

Hey, definitely a "lagniappe" - the unexpected repayment of the large personal loan. Thanks to you, I learned the meaning of that word. Nice to hear from you and congrats on the retirement and lagniappe!

 

[Alan]

Yes... that's what I meant... Often, in the same thread, discussions about "income" in retirement get mixed up, with one person talking about an income, (for instance) of $50,000/yr, while another person includes SS and quotes $65,000/yr. When planning our retirement, if we had not taken Social Security into account, I would have continued to work the extra three years... to age 65. As it turned out, with inflation staying low, it was the right decision.

I feel badly that so many younger people look at the future as if SS will not exist when they retire.

Of course, almost all discussions here seem to look at SWR as cast in stone... and that appears to be safer. We chose to plan on the decrement of capital, rather than a continued income stream. Perhaps a nuanced calculation, but one that we feel comfortable with.

Gotcha, and agree.

I always counted in SS once I started ER planning about age 40

 

[imoldernu]

also has no room for my stash of booze, which may be growing as my rate of acquisition far exceeds my consumption rate. ..

I did try to add variety like music, food, drink, and travel topics. Come on, my fellow [-]geezers[/-] retirees! Retiring, early or late, should be about more than money!

Yeah!!!... side note.... One of my expectations was joy in the "consumption" part. Was not to be... Falling asleep before finishing the second beer, is more like it.

shouldn't "geezer" be capitalized?

 

[audreyh1]

Wife would not go for it. But then, I am now learning to do more cooking, and just made chili jelly for the first time, and also different types of terrine. It's hard to do that in the cooking space of a 25' RV, which also has no room for my stash of booze, which may be growing as my rate of acquisition far exceeds my consumption rate. So, my boondocking fantasy may never get realized.

Just joking!

That's what I missed most when I was full time RVing - a real kitchen (and oven). I did make up for it somewhat by learning how to do some really nice cooking outdoors.

Now that I have a non-wheeled home, I enjoy the kitchen very much. But I also indulged in a large grill for the patio - a size I would never be able to store in my RV.