Originally Posted by samclem
If you lived in a rented apartment would you have a 100% equity portfolio?
Why are things different if you live in a paid-off house? Sure, your annual expenses will be lower, but that just means selling fewer of whatever you have (stocks/bonds/collectible styrofoam lawn ornaments) to meet expenses.
But what's the argument (other than simplicity) for ignoring it altogether? If you sell your house and rent, you don't ignore the proceeds from the sale. Nearly everyone would just roll them into the existing AA. So implicitly, we're assigning to our houses an AA identical to the one we've chosen for our liquid portfolio. Is that the right approach? I'm not sure.
One way to think about it is that if the "yield" on your house is greater than your WR, your WR goes up if you sell and rent. Certainly it would make sense to change AA in the face of a changed WR. Maybe the answer isn't that a house is the same as a bond (which it isn't), but that owning a house impacts your withdrawals in a certain way, and that impact should, or at least could, affect your AA.
Consider our case where we've moved out of our house and put it up for rent. Maybe it's a temporary situation, maybe we'll move back in, maybe we'll sell it and move somewhere else, maybe we'll rent it out indefinitely. Do we still ignore the property? It doesn't seem like we can. It also seems like there should be a single answer that accommodates whatever decision we make. But I don't know what that answer is.