70%

[deserat]

The issue is not that most of us don't have enough house, but rather MOST OTHER people don't have enough investments. If you own a $70,000 house and $30,000 in stocks, then you've hit the 70% they mention...and sadly I think this is where many Americans are.

I really wonder about the statistics of this - if it is true that most are in that type of situation, what does that say about the future....and their ability to 'raid' other people's cookie jars? As I ponder the ER and FI situation, I see some distinct differences: 1) one can try and optimize their living expenses such that they minimize those expense - however, with the probable inflation explosion and increase in tax confiscation, it seems as if that expenses optimization line will re-adjust higher, with less of the amount being discretionary; 2) be so damn wealthy, you don't care. I'm grappling with where the middle ground is and am having a hard time finding it. Any ideas? Or am I just trying to have a better crystal ball as many of the posters here post about?

On topic - CA, NY, DC - areas where people would be house rich and other asset poor. I find that many of the authors of these 'articles' tend to live in those areas and skew their article to that audience.

Lastly, if the above is true (70% of net worth is house), and the non-scientific review of the posters on this board and their percentage (avg 15%), this group of people on this board is quite a unique one and it seems a rare one......

 

[traineeinvestor]

one can try and optimize their living expenses such that they minimize those expense - however, with the probable inflation explosion and increase in tax confiscation, it seems as if that expenses optimization line will re-adjust higher, with less of the amount being discretionary

If I had to generalise, those who have a high percentage of their wealth tied up in expensive housing in states with serious deficit problems are most vulnerble to tax increases - specifically increases in property taxes.

I own a rental house overseas (where I used to live) partly as an investment and partly as a hedge against the cost of buying a house should I ever return to live. However, the local equivalent of property taxes has been consistently rising at rates higher than general CPI and higher than the rent I am collecting. I am considering selling because of the rising tax issue.

I would be very surprised if the posters on this board were representative of the population in general.

 

[Rambler]

Ours seems to be around 18%. California, mcmansion, paid for. If we chose to rent, in order to rent something of equal caliber, I figure that our income producing investments would have to be about $1.4M more than they are (that is not the value of the house, just what I would need at my target <3% WR to pay the rent). House is not worth that much.

So when considering balanced planning and working assets, I do consider the value of my home (i.e., better to rent or better to own??). I do consider it part of my net worth. However, since it is paid for and we will not have to rent (replacement value), I do not consider it in my WR calculations, because I am not withdrawing from it. I only consider the on-going costs such as prop tax, insurance, and upkeep. Thus while it is a working asset, and therefore an investment, it is illiquid and does not produce cash, nor does owning it result in income taxes. Therefore, for current liquidity cash planning purposes, it is left out of the equation.

That said, DW and I do view it as insurance. We may eventually sell and move to something @ 25-35% of our home's value, but that would only be when we are no longer able (or willing) to care for it (and the acreage it sits on).

R

 

[beowulf]

I consider the equity value in our home that I know I can get if I sell it as part of my net assets. Yes, we all have to live somewhere, but the known cash value of of the home that I would keep in a sale is indeed an asset. We could always rent or live with kids (severely endangering our mental health, not to mention theirs) or buy something very cheap in a low cost area. In any of these scenarios, we would end up with a decent chunk of cash out that would not be taxable. We are among those who have only owned two homes in our lives, and we have had the current one for 27 years. I feel confident that, even if we dropped the price to a level that would make a very quick sale possible, we would still be walking away with 3 to 4 times what we paid for it. To me, that's an asset. But, as others, I don't count that asset when I figure what will be a reasonable SWR. It's there if absolutely necessary, but not part of a realistic calculation of what we can pull annually for income.

 

[ProspectiveBum]

The issue is not that most of us don't have enough house, but rather MOST OTHER people don't have enough investments. If you own a $70,000 house and $30,000 in stocks, then you've hit the 70% they mention...and sadly I think this is where many Americans are.

I really wonder about the statistics of this - if it is true that most are in that type of situation, what does that say about the future....and their ability to 'raid' other people's cookie jars?

I had a project at work at while back to put together a report on a customer's 401k data. In building that report, I could see the contribution levels of the 400-500 employees in the organization. Just from eyeballing it, I'd guesstimate that fewer than 10% were contributing the max, and the majority of those seemed to be older employees contributing up to "catch-up" limit of $21,500. Most of the contributions were very small ($2K - $3K per year).

The 401k consultant at my own company told me that I'm one of only 2 people at my ~20-person company contributing the max.

I do get concerned that by being responsible now, I'm going to get "punished" later in life, to help pay for the folks who haven't saved enough.

 

[Kronk]

Guess I'm in the vast minority. House equity (paid off house) is around 50-55% of our net worth.

But at least we're going in the right direction -- at the beginning of 2009 it was more like 63%.

I have calculated that between house upkeep, 4% SWR on the house equity, property taxes, etc. that what we've got is equivalent to $2,000 in rent. In other words, if we sold our house, put the proceeds in a diversified portfolio, and rented something for $2k/month our net finances would basically look the same. That doesn't include fluctuating home prices, but it was still a useful exercise for me to go through to figure out how much my house "costs" me.

 

[deserat]

I had a project at work at while back to put together a report on a customer's 401k data. In building that report, I could see the contribution levels of the 400-500 employees in the organization. Just from eyeballing it, I'd guesstimate that fewer than 10% were contributing the max, and the majority of those seemed to be older employees contributing up to "catch-up" limit of $21,500. Most of the contributions were very small ($2K - $3K per year).

The 401k consultant at my own company told me that I'm one of only 2 people at my ~20-person company contributing the max.

I do get concerned that by being responsible now, I'm going to get "punished" later in life, to help pay for the folks who haven't saved enough.

Very interesting stats - I still contribute the max and I'm only working part-time. My husband contributes the max as well....it's something that isn't negotiable. We'll go without the nice stuff in order to ensure we hit that max. He didn't do that before he married me, but he sure does now and loves looking at our portfolio (well, with the rough and tumble stock market, it sometimes astounds him to see the swings in our net worth).

If your small sample size is representative, then that 10% of those only contributing to the max means many will be working a lot longer, so perhaps SS won't take such a dive or be as bad as predicted with many still needing to work beyond normal retirement age (which is being slowly adjusted upward).

I think the 'punishment' is coming soon - just how bad it will be is the question andhow fast one can recover or adjust.

 

[mickeyd]

I do get concerned that by being responsible now, I'm going to get "punished" later in life, to help pay for the folks who haven't saved enough.

I usually assume that future Congresses will look back on those of us that have LBYM and try to screw us. The Roth IRA, for example, has a bunch of ways that they can [-]screw us, tax us,[/-] punish us in the future.

We just have to trust our elected officials...