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Old 10-08-2017, 08:16 PM   #21
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Can't eat my house, so I see no point including it in my spendable portfolio.
+1-You have to live some where
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Old 10-08-2017, 09:02 PM   #22
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I don't include it in Firecalc. I do include the expenses for the house in my spending for Firecalc.
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Old 10-08-2017, 09:21 PM   #23
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Also in California like Robbie, and my house is not included as prop tax is low (3k yr) + prop ins only 980 + 670 (earthquake ins). So that's only around 400m to live in SF Bay. Plus houses are 40' apart which is important to this claustrophobic
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Old 10-08-2017, 09:46 PM   #24
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Youíre confusing assisted living with independent living. Memory care is often in assisted living but with locked facilities so they donít wander off. Assisted living also ensures you get your needed medications, assists in bathing and dressing, if needed, and deals with incontenence. I donít think they drive. Long term care is when full time nursing care is required. Independent living they can drive, but are checked on daily. The typically eat in a cafeteria, so they donít have to cook, but can cook in their apartment if they choose. Assisted living they canít cook.
Yes, assisted living ensures you get needed medications and and assistance, if needed, with bathing and dressing, but only if needed. Yes, you can drive. At my Dad's assisted living place a couple of the residents have cars, and sometimes drive. They have to check out and check in.

Things may not be as cut and dried as you think.
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Old 10-09-2017, 03:35 AM   #25
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i don't include a house in any income calculation until it is actually sold . i can't draw out 4% of the living room
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Old 10-09-2017, 05:09 AM   #26
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I don't include it, but realistically if we get so sick that we must live in assisted living, it becomes my backup plan to cover the LTC costs so that I don't have to pay for LTC insurance.
+1
me too, actually glad to hear this as I mentioned this on another forum and was basically told I was an idiot for not purchasing LTC insurance.

Although I do plan on downsizing not so much for the financial benefit but more because my house is a 4 story townhome at probably not the best spot for someone with osteoarthritis and one knee replacement.
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Old 10-09-2017, 05:59 AM   #27
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I don't include it, but realistically if we get so sick that we must live in assisted living, it becomes my backup plan to cover the LTC costs so that I don't have to pay for LTC insurance.
exactly how I see it, as well. This is what my dad did.

It's not a bad insurance plan really, because the home has value, and when one needs LTC, one no longer needs the home. Liquidity can be an issue, but not an insurmountable one.
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Old 10-09-2017, 06:46 AM   #28
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I don't include the house in calculating spending budget (RIP/firecalc), but do use it for estate planning. In fact I often left out significant levels (~25%) of investable assets when using the planners as I was too lazy to port all the data (had the assets spread among too may brokers).
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Old 10-09-2017, 06:53 AM   #29
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I’m a little surprised that once retired for a while, so many people continue to run FC? Do you really rely that much on it? Does it change much from one year to the next? I can certainly understand that your principal residence might be part of your future financial plans but do you need FC to do that? Just wondering.

We have a fair amount tied up in real estate but don’t specifically include it in any future plans. A cushion if and when liquidated. Not needed for LTC which we could fund out of regular cash flow.
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Curious how others handle principal residence...
Old 10-09-2017, 06:57 AM   #30
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Curious how others handle principal residence...

I, too, like many on here simply look at the house as a cushion for spending margin of error as well as a significant asset that can cover LTC if needed.

I suppose part of what got me questioning this approach is that our current spending (without regard to house value) level is sufficient to pay for Assisted Living Care for the two of us today. Thus, that spending level 25 years out (assuming CPI covers actual LTC inflation) should also be sufficient to cover Assisted Living Care. Therefore, house value wonít be needed to cover that potential future expense.

So if this is the case (LTC inflation compared to CPI being the potential fly in the ointment) monetizing house to coincide with anticipated future entry date (as you no longer need house) into Assisted Living makes sense "intellectually" to avoid "underspending".

Reality is like most here, we wouldnít increase our current spending level just because we could, but it is interesting to quantify the level of "conservatism" in the numbers.
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Old 10-09-2017, 07:10 AM   #31
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The only time I count my home’s NW is when I’m approaching an arbitrary nest egg milestone and I need some extra to get me over the hump. This is purely for a temporary, psychological boost.
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Old 10-09-2017, 08:48 AM   #32
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Because i have a fair amount of real estate and shorter 15 year mortgages with tons of principal i have spent alot of time on this exact problem and how to model it.
Bottom line i arrived at is to:
- model firecalc with all your spending including morgages and principal
- if any of your real estate is cash flowing add the net cash flow (CoC) as an inflation adjusted pension income
- for the date your mortgages are paid off enter your principal and interest (not escrows) as a NON inflation adjusted spending reduction

Above method can work for your owner occupied real estate or rental properties


If you sell or refi any properties you need to completely redo firecalc and if the equity in a property or the payments are large this can change things a lot.
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Old 10-09-2017, 09:57 AM   #33
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Can't eat my house, so I see no point including it in my spendable portfolio.
Well, you can't eat a mutual fund either, but you can sell both and buy food with the proceeds.

I would be very very conservative with the estimated proceeds from the house after whatever replacement cost for living quarters, but it is a possible source. I consider it a backup plan for me, that I can downsize if I have to. Since it's a 3 story house that's remote in many ways I doubt I'll live here in old age, but I don't know how pricey I'll replace it with so I don't include it in my calculations. Plus I'd like to live in at as long as I'm able, and not have to move when I'm 75 or 80 because that's what my plan dictates.
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Old 10-09-2017, 10:12 AM   #34
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I consider it a backup plan for me, that I can downsize if I have to.
+1

I do not include in FireCalc or other forecasting tools, but it is part of my emergency backup plan if something goes wrong with our primary plan. Even in that plan we discount its worth by 25%. If we get to the point where we must sell it for financial reasons we would likely sell it below the prevailing market price for a quick sale.
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Old 10-09-2017, 10:20 AM   #35
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+1

I do not include in FireCalc or other forecasting tools, but it is part of my emergency backup plan if something goes wrong with our primary plan. Even in that plan we discount its worth by 25%. If we get to the point where we must sell it for financial reasons we would likely sell it below the prevailing market price for a quick sale.
My hope is that if I do have to sell it for financial reasons, I'll see it coming from a long ways away and not be forced into a fire sale. Even if there was a semi-catastrophic event, if it drained half of my investments I could live on the other half until I was able to sell for a reasonable price to boost my portfolio back. It's not 100% foolproof but in most cases I'm not going to let things slide until I realize I'm down to near nothing and suddenly have to sell. I have no mortgage and taxes and maintenance aren't all that high. Still, I recognize if there's a lasting downturn in the economy, resort areas like the one I live in will be among the very worst hit.
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Curious how others handle principal residence...
Old 10-09-2017, 10:21 AM   #36
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Curious how others handle principal residence...

Quote:
Originally Posted by jollystomper View Post
+1

I do not include in FireCalc or other forecasting tools, but it is part of my emergency backup plan if something goes wrong with our primary plan. Even in that plan we discount its worth by 25%. If we get to the point where we must sell it for financial reasons we would likely sell it below the prevailing market price for a quick sale.


Hopefully you (me, too) never get so surprised, and are sailing so close to the financial edge, that you'd have to "fire sale" your house at a 25% discount to market.
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Old 10-09-2017, 10:26 AM   #37
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Am another one who does not use our home for net worth purposes as we plan to pass on to the kids. Due to CA state's prop 13, would assume most Californians who purchased years ago would make the same decision (if possible).
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Old 10-09-2017, 11:30 AM   #38
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Iím a little surprised that once retired for a while, so many people continue to run FC? Do you really rely that much on it? Does it change much from one year to the next?
Good observation. I think the main reason I still run it often is that it is an acquired habit, in much the same way that some people instinctively check their cellphones or computers for e-mails on a regular basis, or others check into an online forum just a little too regularly to see if there are any new posts (guilty on all counts )
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Old 10-09-2017, 12:08 PM   #39
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Good observation. I think the main reason I still run it often is that it is an acquired habit, in much the same way that some people instinctively check their cellphones or computers for e-mails on a regular basis, or others check into an online forum just a little too regularly to see if there are any new posts (guilty on all counts )


I would add that most of us didnít get to ER by a) not sweating the details and b) not being fully engaged financially speaking.

Speaking for myself, I retired over two decades ago; and, have a hopeful three more decades to plan for (give or take).

An awful lot can change, both positive and negative, over a 50 year span. So I figure best to keep an early warning system in place to head off any issues before they ever start. Financial calculators play a role in that regard...
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Old 10-09-2017, 01:03 PM   #40
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My hope is that if I do have to sell it for financial reasons, I'll see it coming from a long ways away and not be forced into a fire sale.
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Hopefully you (me, too) never get so surprised, and are sailing so close to the financial edge, that you'd have to "fire sale" your house at a 25% discount to market.
I agree, my hope is that I do not have to do a fire sale. But we obtained our house in sort of a fire sale (for almost 30% off the original asking price from a couple going through a divorce), so that is in the back of my mind and 25% is a "worst case" scenario. I was also considering not knowing what the market conditions might be when one chose to sell, which was also a factor when we bought our house.
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