Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Primary and secondary residence, neither is counted as your assets?
Old 06-06-2013, 11:28 AM   #1
Recycles dryer sheets
 
Join Date: Aug 2010
Posts: 359
Primary and secondary residence, neither is counted as your assets?

I understand that primary residence is normally not counted in your asset when calculating WR, until it is liquidated.

How about if you have a secondary residence? Do you not count that as well?

In my case:
Our primary is paid off --- valued $450,000
Secondary with mortgage $120,000. ---- equity valued $180,000.

Do I ignore these until I liquidate either?
__________________

__________________
fh2000 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-06-2013, 01:35 PM   #2
Thinks s/he gets paid by the post
packrat44's Avatar
 
Join Date: Jun 2007
Location: near Canadian border and near Mexican border
Posts: 1,142
I do not count our secondary residence as an asset for calculating WR. If a person acquires significant rental income from the secondary residence while not using it themselves, I might consider counting it.
__________________

__________________
Pigs get fat, hogs get slaughtered. That's my story and I am sticking to it.
packrat44 is offline   Reply With Quote
Old 06-06-2013, 03:16 PM   #3
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
If you plan on liquidating them when needed, and account for rent or a new home in the calculations, then it might be reasonable to include either as a retirement asset. If you're going to keep them forever then they are not part of your spendable retirement assets. Can't really include them as part of your portfolio in a retirement calculator since the portfolio is modeled as stocks and bonds, with rebalancing. I think the best approach would be to assume changes in income and spending to account for house downsizing.
__________________
Animorph is offline   Reply With Quote
Old 06-06-2013, 04:21 PM   #4
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,860
Quote:
Originally Posted by packrat44 View Post
I do not count our secondary residence as an asset for calculating WR. If a person acquires significant rental income from the secondary residence while not using it themselves, I might consider counting it.
I don't have a second home, but if I did I would not use it for computing WR either. In my case, if I got rent from it I would subtract that from the amount I need to cover from portfolio withdrawals, rather than using it for computing WR. I do this with my pension, too.

In other words, my monthly spending is $XXXX, my monthly pension is $YYY, and my annual withdrawal must cover 12*($XXXX-$YYY).
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 06-06-2013, 04:31 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,424
I would not count as part of the denominator unless you have definite plans to sell it and add the proceeds to your retirement nestegg. As others suggest, if you get reliable rental income from it you would include any rental income as a reduction to the numerator.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 06-06-2013, 05:07 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,971
Quote:
Originally Posted by pb4uski View Post
I would not count as part of the denominator unless you have definite plans to sell it and add the proceeds to your retirement nestegg. As others suggest, if you get reliable rental income from it you would include any rental income as a reduction to the numerator.
+1, my response too.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 06-06-2013, 06:07 PM   #7
Full time employment: Posting here.
 
Join Date: Jan 2011
Posts: 575
Quote:
Originally Posted by pb4uski View Post
I would not count as part of the denominator unless you have definite plans to sell it and add the proceeds to your retirement nestegg. As others suggest, if you get reliable rental income from it you would include any rental income as a reduction to the numerator.
+1.
I don't include my secondary home for WR computations.
For the same reason mentioned above, I also don't include my primary residence.
__________________
KingB is offline   Reply With Quote
Old 06-06-2013, 07:02 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,643
Yes, the question is counted for what? Net worth, sure. SWR, not unless it is income producing or soon to be sold.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 06-06-2013, 07:15 PM   #9
gone traveling
 
Join Date: Jul 2007
Posts: 333
Quote:
Originally Posted by donheff View Post
Yes, the question is counted for what? Net worth, sure. SWR, not unless it is income producing or soon to be sold.
Agreed, they are clearly assets but I wouldn't include them in my WR calculations until one or both are liquidated or used for income generators (rented).
__________________
HighRoller is offline   Reply With Quote
Old 06-06-2013, 08:25 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,820
If you're using FireCalc, you can assume some future sale date and input a portfolio increase in the "Portfolio Changes" tab. Then FireCalc will give you the number of dollars you can "safely" withdraw today, knowing that you will augment your assets in the future by selling the second home.

Note the FireCalc does not provide a "safe withdrawal rate", but rather a "safe withdrawal amount".
__________________
Independent is offline   Reply With Quote
Old 06-06-2013, 08:35 PM   #11
Recycles dryer sheets
kmt1972's Avatar
 
Join Date: Mar 2013
Location: Scarsdale
Posts: 175
We have a pied a terre in NYC which we plan to sell once we semi-retire. So for that condo which is worth a bunch I do count toward assets we can use in our retirement.
__________________
"There are no solutions...there are only trade-offs." - Thomas Sowell

Looking to retire or semi-retire by 45 based on our net worth going to $6 million outside our house.
kmt1972 is offline   Reply With Quote
Old 06-07-2013, 12:16 AM   #12
Thinks s/he gets paid by the post
Katsmeow's Avatar
 
Join Date: Jul 2009
Posts: 3,396
We had some land that we sold last year. While we still owned it, I didn't include it as part of my portfolio for determining a withdrawal rate. Once I sold it and received the money I included that in my portfolio.

I think that if I still owned it I would be including it in my net worth but not in my portfolio in, for example, FireCalc.

That said - if I owned sizable non-primary residence property while I wouldn't include it in FireCalc it might play a factor if I was trying to decide on whether to accept a less than 100% FireCalc result or possibly in deciding an exact withdrawal rate.

Primary residence I don't really include it either. However, with a paid for house or substantial equity where if you sold the house you would have money left over after buying a new residence, I might also consider that in thinking about my overall financial condition. That is, if one had for example a primary residence with equity of $750,000 and you knew that you planned to sell it and buy a replacement for $250,000 then that fact might bear on what kind of overall portfolio success would be acceptable to you or what kind of withdrawal rate would be acceptable.
__________________
Katsmeow is offline   Reply With Quote
Old 06-07-2013, 01:32 AM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by donheff View Post
Yes, the question is counted for what? Net worth, sure. SWR, not unless it is income producing or soon to be sold.
+1
Another way of looking at is your house generates a complete safe withdrawal that is equal to how much you'd pay for rent.

If you also want to count your house for SWR purpose than you need to increase your expense by what it would cost to rent your house.

Obviously it is easier to ignore the house for calculating SWR.
__________________
clifp is offline   Reply With Quote
Old 06-07-2013, 09:09 AM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,424
Quote:
Originally Posted by clifp View Post
+1
Another way of looking at is your house generates a complete safe withdrawal that is equal to how much you'd pay for rent.....
Actually, I think it would be rent less what you pay for property taxes, home insurance, home maintenance, etc.
__________________

__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 04:20 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.