Whats the ratio of your net worth to your taxable income

[Tadpole]

OK, I'll bite. My ratio is, say, one. What does that tell you?
a) I have woefully little networth.
b) I have high net worth and a job with even higher income.
c) I have high net worth and my tax-efficient-able income is incredibly high.
d) I have neither net worth nor taxable income (that is: networth=income, therefore networth/income=1=0/0).
e) There is meaning here no matter the origin of the numbers.

(Actual answer was "above 25"; after all I'm just one year into retirement; probably at my max - older people will be way above 25 around here)

 

[youbet]

OK, I'll bite. My ratio is, say, one. What does that tell you?
a) I have woefully little networth.
b) I have high net worth and a job with even higher income.
c) I have high net worth and my tax-efficient-able income is incredibly high.
d) I have neither net worth nor taxable income (that is: networth=income, therefore networth/income=1=0/0).
e) There is meaning here no matter the origin of the numbers.

But who does most of the cooking at your house?

 

[Tadpole]

But who does most of the cooking at your house?

Well, my husband was doing 100% but he got sick and I am now doing 100%.

 

[justplainbll]

OK, I'll bite. My ratio is, say, one. What does that tell you?
a) I have woefully little networth.
b) I have high net worth and a job with even higher income.
c) I have high net worth and my tax-efficient-able income is incredibly high.
d) I have neither net worth nor taxable income (that is: networth=income, therefore networth/income=1=0/0).
e) There is meaning here no matter the origin of the numbers.

(Actual answer was "above 25"; after all I'm just one year into retirement; probably at my max - older people will be way above 25 around here)

0/0 = 1?
Would seem odds are that with a ratio of 1and retired without a COLA'd pension and hoping to be around for another 20 - 30 years it's unlikely you'll be financially independent.

 

[youbet]

Well, my husband was doing 100% but he got sick and I am now doing 100%.

Sorry, just realized I asked a question regarding the wrong poll.

Hope hubby is doing better.

 

[Danmar]

A very imprecise mechanism for capitalizing the value of a pension is to multiply the annual pension benefit by 20 to 30. In other words an annual pension of 25k could be considered to add 500 to 750k to a pension beneficiaries net worth.

Closer to 20 I would think unless you have a significant survivor benefit for a much younger spouse. If I capitalize our pensions at 25 times the multiple of pretax earnings to nestegg is about 25 times which means our SWR is close to 4%. Not sure what this means? Obviously very different once you retire versus the pre-retirement accumulaton phase?

 

[justplainbll]

Closer to 20 I would think unless you have a significant survivor benefit for a much younger spouse. If I capitalize our pensions at 25 times the multiple of pretax earnings to nestegg is about 25 times which means our SWR is close to 4%. Not sure what this means? Obviously very different once you retire versus the pre-retirement accumulaton phase?

For those already receiving a pension, the remaining number of years of pension payments and the analysis / discount rate would seem to be the major factors determining where in the range of 20 to 30X the present value of the pension income stream lies..

 

[Alan]

For those already receiving a pension, the remaining number of years of pension payments and the analysis / discount rate would seem to be the major factors determining where in the range of 20 to 30X the present value of the pension income stream lies..

I simply punched my existing pension numbers, including age etc into this free annuity estimator to get an equivalent lump sum for my pension.

 

[Brdofpray]

I simply punched my existing pension numbers, including age etc into this free annuity estimator to get an equivalent lump sum for my pension.

Without my pension conversion, our ratio was 8. With the conversion, our ratio is 25.

 

[DesiGirl]

Well our current ration is 10-12 , as soon as DH retires it would go upto 40-50 because we are LBYM (seriously) and we are going to cross into 40s this year so I guess the results depend on lots of factors :
* Age
* ER or Not

and some but all in all most people on this forum should be PAWs (Prodigious Accumulators of Wealth : As in "Millionaire Next Door")

-Desigirl

 

[NW-Bound]

Net worth over taxable income?

Lemme see... Been counting my money with Quicken daily, so I know that amount (to the last dollar, not to the last penny as some people here do ). Add to that a conservative estimate for RE values...

Taxable income? Why, I just looked that up the other day to answer a thread posted by Ha.

And the ratio is ... 47.5!

Whoa! And my gross income in 2010 was a low 6 figure... Why didn't I feel rich?

Oh, let me see... Yes, there's this deduction and that deduction, which brought down the taxable income. And retired or not, I will still have to pay for those deductions, like health care, RE taxes, etc...

Yes, there's the reason I did not feel rich... I am relieved now...

 

[Lisa99]

Ok I'll bite. Our current ratio is 3 and our FIRE year one ratio will be 6. BUT we have high income and save >60% so for us the ratio is meaningless.

 

[obgyn65]

My ratio is between 5 and 10%, depending how I calculate my net worth (i.e. inclusion of pension or not).

 

[justplainbll]

My ratio is between 5 and 10%, depending how I calculate my net worth (i.e. inclusion of pension or not).

Is your 5% and 10% the inverse of net worth divided by after tax income?
(I.E. after tax income / net worth)
If so, your ratios would be 20 and 10.
With 68 responses, the average ratios appear to be:
Mean == 17+
Median = 18
Mode == 25+

 

[marko]

Portfolio / AGI = 28 for me (no pension or SS)...must be something wrong w/ my math!!

My portfolio (most inside the IRA) does a LOT better but I'm only counting my what I withdraw to live on for the AGI calc.

 

[justplainbll]

Portfolio / AGI = 28 for me (no pension or SS)...must be something wrong w/ my math!!

My portfolio (most inside the IRA) does a LOT better but I'm only counting my what I withdraw to live on for the AGI calc.

OP asked us to use taxable income as opposed to AGI.

 

[marko]

OP asked us to use taxable income as opposed to AGI.

Oh. So in that case, 25.
In my case, it is only taxable once I take it 'over the wall' of the IRA

 

[MichaelB]

We have 81 votes in the poll and more than 40 posts, so it would be interesting to see what conclusion nun has drawn from this.

 

[RetireBy90]

hrmmm - mine came in vey low, about 10 if I include present value for pensions. However, in the last 3 years we have taken out 2 mortages to get access to low interest rates. I hope to ride my 4.5% mortgage for the full 30 years (unless I can get a 4% one) and invest at a higher return than 4.5%. Maybe give me something to tell the great grand kids about.

Wonder if anyone else has done anything like this to take some of the cheap $$ ?

 

[Danmar]

For those already receiving a pension, the remaining number of years of pension payments and the analysis / discount rate would seem to be the major factors determining where in the range of 20 to 30X the present value of the pension income stream lies..

Agree. I was assuming for a 65 year old. Most people don't start their pensions until close to that. Mine starts this year when I turn 62. If you take your pension early it will usually be discounted so you end up in pretty well the same spot re capitalization.

 

[Danmar]

I simply punched my existing pension numbers, including age etc into this free annuity estimator to get an equivalent lump sum for my pension.

What multiple did the pension get valued at?

 

[Danmar]

hrmmm - mine came in vey low, about 10 if I include present value for pensions. However, in the last 3 years we have taken out 2 mortages to get access to low interest rates. I hope to ride my 4.5% mortgage for the full 30 years (unless I can get a 4% one) and invest at a higher return than 4.5%. Maybe give me something to tell the great grand kids about.

Wonder if anyone else has done anything like this to take some of the cheap $$ ?

This would be the last thing I would do in retirement. Too risky for me.

 

[Alan]

What multiple did the pension get valued at?

14.9

 

[REWahoo]

This would be the last thing I would do in retirement. Too risky for me.

+1

There are many who support this strategy, Nords being one of the most outspoken proponents, but it is not something that even comes close to matching my investing style.

 

[justplainbll]

Originally Posted by Danmar
What multiple did the pension get valued at?

14.9

23 years of payments, discounted at 4%, would yield a multiple of 14.9; for 35 years a multiple of 18.7.
With a more conservative 3% discount rate a multiple of 14.9 represents ~20 years of payments and a multiple of 21.5 for 35 years of payments