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Old 06-19-2010, 10:58 AM   #61
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Am I in trouble? My house is about 65% of my NW. I was hoping to bring that down to about 50% by building up invested assets, at which point the 4% SWR rule makes me FI. I know I could try to sell the house and rent, which would allow me to live on 4% immediately, but I was trying to reach FI with mostly my current lifestyle. Sounds like I have way more tied up in the house than the successful ERs here.
You are only in trouble if (a) your expenses are too great relative to your remaining 50% of NW AND more importantly to your income (ie pension payment and SS); and (b) if so, you are not prepared to modify your expenses over time or eventually move to a less expensive house.
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Old 06-19-2010, 11:47 AM   #62
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For those that are under 10% of NW in a house you either (a) live in a very low cost area or (b) you have one helluva NW. On the coasts, near big cities, "nice" homes are at least $700,000 and more like $900,000 to $1,000,000 at a minimum, which translates to $7 to $10 million Net Worth.

Either way good for you!
We're around 8.5% housing/net worth ratio; don't live in New Yahk City or right on the ocean in Carmel. Kinda like our house though, and cannot fathom having having a "nice" home that represents $700 - $1000k of debt or net worth. Maybe that's why a bunch of people are in trouble with the drop in housing value.

OTOH, don't stay in $250/night hotel rooms either, so maybe we're just a couple country mice and don't know how to live. I'm ok with that.
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Old 06-19-2010, 01:28 PM   #63
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...and cannot fathom having having a "nice" home that represents $700 - $1000k of debt or net worth...
Same here. So I spread that amount to 2 houses to feel less "guilty". It's that mind game thing again.

But some people here have so much more money, and I understand how they feel comfortable even with a $2M mansion. Hey, you cannot take it with you, right?
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Old 06-19-2010, 01:29 PM   #64
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don't live in New Yahk City or right on the ocean in Carmel.
Now you are talking way north of $1,000,000. All needs are relative, but in NYC you are talking easily $2 million for my idea of a modest apartment (3 bedroom). Not familiar with "right on the ocean in Carmel" but I assume that is multiples of my NYC number.

It's all relative...
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Old 06-19-2010, 01:46 PM   #65
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As I replied earlier, our house is 11% of our Total Net Worth....but we didn't necessarily plan for it to be that way....that's just the way it played out in retirement.

When we bought our house 16 years ago, we bought the nicest house we could afford on one salary (we were both working). Since Megacorp relocated us, all the moving expenses were paid and we got a $15k bonus...we used that as the down payment.

The houses that have sold on our block recently have doubled in price since we've moved here. I sit in my house, free and clear and cringe at the thought of the mortgages people are paying around me..
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Old 06-19-2010, 02:36 PM   #66
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Am I in trouble? My house is about 65% of my NW.
Oh boy. Now I'm quoting myself. That really may get me into trouble.

Actually what I meant by does a high % of my net worth in housing get me in trouble was, that this seems different from what the majority of successful ER people are doing. Am I making my path towards FI and possible ER more difficult by having too much capital tied up in the house? Probably.

I got into this position by buying a house that appreciated a lot and didn't deflate too much in the crash. It was never a designed strategy to have so much money tied up in the house and since I still mostly think of it based on what I paid for it, it doesn't seem to be demanding extra expensive upkeep just because it would be pricey to buy now.

Seeing so many people successfully ER is inspiring and one of the things I like most about this place. Knowing that so many did it by keeping housing equity much much lower than I have makes me wonder if there is a problem with my strategy and if I should make adjustments.
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Old 06-19-2010, 02:47 PM   #67
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Sold our McMansion last year and invested the proceeds. The return although not stellar beat what real estate returned over the same period. Renting now and with zero debt am not motivated at all to sink any money into real estate. Having said that and knowing that one should never say never, we have earmarked 15% of our net worth should the right deal/location become apparent.
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Old 06-19-2010, 02:52 PM   #68
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Seeing so many people successfully ER is inspiring and one of the things I like most about this place. Knowing that so many did it by keeping housing equity much much lower than I have makes me wonder if there is a problem with my strategy and if I should make adjustments.
Well, it's like everything else...it depends.

When you get to the point where you're sick of working, look at your funds and see if you can retire comfortably living in your current house. If not, then sell the house and move to a less expensive one.

If you want to stay in your current home and you don't have enough funds...keep working.

We retired on Total Net Funds....not Total Net Worth.
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Old 06-19-2010, 04:15 PM   #69
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While our 3 houses represent about 16% of NW it was not planned that way. Once 1 house that was recently placed on the market is sold this will drop to about 11%.

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We retired on Total Net Funds....not Total Net Worth.
Ditto. Our pensions and SS should cover all/most normal living expenses with the investments available for backup security.
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Old 06-19-2010, 10:12 PM   #70
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Don't try to hide behind your smiley!

In your mere 45th post, you already tried to stir up trouble by bringing up the m*rtg*g* controversy. If that's not reason for censure by the mods, I don't know what is.



Just kidding of course.

I have always thought lively discussions are fun. But then, I stayed away from the political forum, back when it was still open.

And I probably read every thread on the mortgage payoff subject and still can't decide which way to go! It does make for some interesting reading though.
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Old 06-20-2010, 05:52 AM   #71
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Our house is 20-25% of our net worth. We may downsize when I cant take care of it anymore. 20 years from now may be a good time to get something smaller and increase our portfolio from house sale proceeds.
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Old 06-20-2010, 07:13 AM   #72
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When you ask what percentage of our NW is tied up in our houses are you referring to the value of our houses our our equity in our houses? The reason I ask is that currently our paid for house represents about 9% of NW. When I bought my first house, my equity in it was about 70% of NW, but the value of the house was about 200% of my NW.
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Old 06-20-2010, 09:00 AM   #73
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As I said ours is well over 50%, however, housing cost, mortgage + taxes is less than 12% of annual income. For me this is a much more telling figure. I live on annual income, rather that is from SS, pension or investments.

However, as many have said, it is a personal thing. Housing is just one variable in the retirement equation. When you add it all up being content with your lifestyle is what counts.

edited:
After reading the post below, one might look at percent non-discretionary expenses. But heck, if it works for you, that's what counts.
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Old 06-20-2010, 09:08 AM   #74
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Our annual income has been all over the map since retiring 5 years ago. With interest rates near zero, it is looking pretty bad right now. However, our rent (utilities included) is 26% of our withdrawal + pension. That is a bigger percentage than I would like, but there it is.
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Old 06-20-2010, 10:27 AM   #75
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Our home (paid off) represents about 30% of our current net worth. Does not include FERS pension or SS. Still working (6 more years) and building NW.
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Old 06-20-2010, 01:19 PM   #76
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For those that are under 10% of NW in a house you either (a) live in a very low cost area or (b) you have one helluva NW. On the coasts, near big cities, "nice" homes are at least $700,000 and more like $900,000 to $1,000,000 at a minimum, which translates to $7 to $10 million Net Worth.
Last I computed our house is about 7 8% of net worth and Im in So. Ca. You dont have to spend 700 900K for a home to get to this level, just buy for 300K and wait 15 years as I did. So there is a (c) buy low and wait.
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Old 06-20-2010, 02:52 PM   #77
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We paid off our mortgage years before retiring. DW and I are both the sort who abhor being in debt of any kind (strangely, her brother is the exact opposite).

Currently, our free and clear home represents about 15% of net worth, and we're very comfortable at that level. When we make our final move, into the place we plan to end our days, we would be comfortable with a higher percentage, but not too much higher.

For us, the key isn't what a house is worth on the market, but what it's worth to us. There isn't another comparable place within miles of us (even though our home is quite modest), so comparisons are tricky. We feel we got a steal when we bought this place, but others might think it problematic. Being happy to drive in your driveway is worth a lot, IMHO.
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Old 06-20-2010, 03:14 PM   #78
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Last I computed our house is about 7 8% of net worth and Im in So. Ca. You dont have to spend 700 900K for a home to get to this level, just buy for 300K and wait 15 years as I did. So there is a (c) buy low and wait.
For the analysis to have any meaning, the % of house to NW should be mark to current market (as best as possible). Otherwise, any comparisons across folks is apples and oranges.

I suspect as you imply that many of the low % are probably counting thier houses at original purchase price (thus making the % much lower).

Kind 'a like what Prop 13 does to property taxes as a % of current income over time...
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Old 06-20-2010, 03:21 PM   #79
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For the analysis to have any meaning, the % of house to NW should be mark to current market (as best as possible). Otherwise, any comparisons across folks is apples and oranges.

I suspect as you imply that many of the low % are probably counting thier houses at original purchase price (thus making the % much lower).

Kind 'a like what Prop 13 does to property taxes as a % of current income over time...
Yes. When I said my 2 houses are less than 30% of net worth, I meant their current values, which have taken a beating from the top of the housing mania.

Would I lose money if I had to sell now? No, I still have a gain, although inflation would have to be taken into account as I bought one 22 years ago.
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Old 06-20-2010, 06:39 PM   #80
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I suspect as you imply that many of the low % are probably counting thier houses at original purchase price (thus making the % much lower).
Nope, I may have even over-valued ours at 9%. Using purchase price it's between 3 & 4%.
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