Primary and secondary residence, neither is counted as your assets?

[fh2000]

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?

[packrat44]

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.

[Animorph]

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.

[W2R]

Quote:

Originally Posted by packrat44 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).

[pb4uski]

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.

[Midpack]

Quote:

Originally Posted by pb4uski 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.

[KingB]

Quote:

Originally Posted by pb4uski 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.

[donheff]

Yes, the question is counted for what? Net worth, sure. SWR, not unless it is income producing or soon to be sold.

[HighRoller]

Quote:

Originally Posted by donheff 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).

[Independent]

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".

[kmt1972]

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.

[Katsmeow]

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.

[clifp]

Quote:

Originally Posted by donheff 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.

[pb4uski]

Quote:

Originally Posted by clifp +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.