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Old 12-28-2016, 01:52 PM   #41
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But in my opinion you've come up with a standard definition of net worth that really doesn't have a very practical meaning other than to be able to compare things. Now we know how many oranges we each have, but I also have a lot of apples, and I happen to like apples better than oranges, so I don't really care that you have a couple more oranges than me.
Bingo! I feel like we hit a breakthrough moment. If we can agree on this point, then I am happy to begin to discuss how we can all achieve the best cash flow to retire on happily ever after.
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Old 12-28-2016, 03:09 PM   #42
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Originally Posted by COcheesehead View Post
Bingo! I feel like we hit a breakthrough moment. If we can agree on this point, then I am happy to begin to discuss how we can all achieve the best cash flow to retire on happily ever after.
Like we're ever going to agree on what "retire" means....
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Old 12-28-2016, 03:13 PM   #43
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Like we're ever going to agree on what "retire" means....
True dat.
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Old 12-28-2016, 03:40 PM   #44
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I won't bother with all the multi-quoting, but I agree that precise definitions are a good thing. Then, what you do with that info is another matter. It's mostly a matter of context. So someone can ask about the 'net worth' of two posters here, and they might provide the same number, using the same formula assets-liabilities. But that doesn't tell us much. One may have a serious disease, not expecting to live a year, no dependents, no one they care to leave money to. The other may be 50 years old with a normal life expectancy (which means 'who knows?') and several people highly dependent upon them. And then there are pensions, COL, and a million other things.

So why ask? What can we learn? I think almost nothing. I don't get it, but it's a free country, so ask away. But I am curious as to why people are curious about such things.

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Like we're ever going to agree on what "retire" means....
Yep, there's another ticking time bomb! Lots of definitions. I side step it, as DW still works because she wants to, so I don't know where I fit, and I don't care. All I know is I'm pretty happy, and far happier than when I had to be somewhere at a specific time for most of the day at least 5 days a week, doing mostly useless 'work'. Good enough for me!


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Old 12-28-2016, 04:58 PM   #45
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I only have one net. It's worth around $20 or so.
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Old 12-28-2016, 07:14 PM   #46
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So should my future stock and bond dividends be included in my net worth calculation?
Not in my opinion, but the assets that produce them should be counted..
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Old 12-28-2016, 07:24 PM   #47
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Net worth is a simple calculation: assets - liabilities. Pension income should be looked at as part of cash flow and not a defined asset included in net worth, unless it has a lump sum option that can be defined.
Should I include future dividend payments in my net worth calculation, no. See the point?
Well, dividends can be a lot less secure than some pensions. Military retirement etc are pretty well "sure things" and thus their "value" is inherent. In fact, many states consider years towards a retirement part of marital assets for just that reason (a friend's wife will get 25% of her ex-husband's retirement check for life as part of their divorce agreement for instance). If the court's count it as an asset, shouldn't we?
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Old 12-28-2016, 08:40 PM   #48
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Old 12-28-2016, 09:25 PM   #49
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Not in my opinion, but the assets that produce them should be counted..
Sorry, didn't use the sarcastic font. I was trying to make a point.
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Old 12-28-2016, 09:25 PM   #50
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Pensions are taxed as ordinary income and capitol gains and qualified dividends are favored. SS is taxed at 85% of ordinary income.

That makes investments worth more than pensions.
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Old 12-28-2016, 09:33 PM   #51
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Like we're ever going to agree on what "retire" means....
I'm pretty sure we have defined what "work" is. "Retire" is the direct opposite.

As far as net worth, when you have ZERO net worth, anything you can turn into cash in a reasonable period of time is an asset and part of net worth.
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Old 12-29-2016, 07:48 AM   #52
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But in my opinion you've come up with a standard definition of net worth that really doesn't have a very practical meaning other than to be able to compare things. Now we know how many oranges we each have, but I also have a lot of apples, and I happen to like apples better than oranges, so I don't really care that you have a couple more oranges than me.
I might have some pears to go along with the apples and oranges.

Cheers!
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Old 12-29-2016, 08:51 AM   #53
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Pensions are taxed as ordinary income and capitol gains and qualified dividends are favored. SS is taxed at 85% of ordinary income.

That makes investments worth more than pensions.
Sometimes true, but not always. Our investments are almost all in tax deferred accounts. Big haircut when getting out or converting. (Hmmm. No payroll taxes on that--is that true of pensions too?)
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Old 12-29-2016, 09:01 AM   #54
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Pensions are taxed as ordinary income and capitol gains and qualified dividends are favored. SS is taxed at 85% of ordinary income.

That makes investments worth more than pensions.
As has been discussed before, capital gains are taxed differently from ordinary income, but that isn't always 'favored' treatment, in fact it often is a negative for people with capital gains.

The problem is, inflation and time are not considered. Example:

I invested $10,000 20 years ago, the investment grows to $15,000. I pay 15% on the $5,000 of gain, $750.

Someone else invested $10,000 2 years ago, the investment grows to $15,000. They pay 15% on the $5,000 of gain, $750.

So even though I actually lost money to inflation, I still pay taxes on it. The same amount as someone who didn't lose anywhere near as much to inflation.

If it was 15% adjusted for inflation, then we could say 'favored'. Until then, we should say 'different'.

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Old 12-29-2016, 09:08 AM   #55
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As has been discussed before, capital gains are taxed differently from ordinary income, but that isn't always 'favored' treatment, in fact it often is a negative for people with capital gains.
Also, in some states, pensions and other retirement income are not subject to state tax, but capital gains and dividends are taxed as ordinary income.
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Old 12-29-2016, 09:39 AM   #56
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Pensions are taxed as ordinary income and capitol gains and qualified dividends are favored. SS is taxed at 85% of ordinary income.

That makes investments worth more than pensions.
I get monthly checks that aren't taxed at all... that's pretty "favorable" imo
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Old 12-31-2016, 07:11 AM   #57
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I think people knew what net worth is, but they were trying to make the point that only investable assets are meaningful for the purpose of generating cash flow to maintain the existing lifestyle, and also to support the other "cash draining" assets.
Most all assets are investable. It's a matter of choice to have some that you don't invest. That someone chooses to own a $1M house outright & another chooses to rent doesn't mean the first's $1M isn't investable & many would consider that $1M as invested. The house does generate a cash flow, it just may not show up for another 20 years.
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Old 12-31-2016, 11:41 AM   #58
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Oh, I get it! This is a definitions thread. OK, here are my definitions of all these tricky phrases and terms. YMMV:

My definition of being retired is not working.

Working is having to do something for money when you'd really rather be doing something else.

My definition of investment portfolio is my investments at Vanguard, the TSP, and so on.

My definition of net worth is my investment portfolio plus the value of all my tangible stuff that I could sell to get money, like my car and house. If I owned a rental house, then its value would be part of my net worth.

My definition of an income stream is money coming in regularly that isn't part of my net worth. Examples would be my pension and SS and dividends from my portfolio. If I rented a rental house, then the rent income would be an income stream and not part of my net worth.

Like I said, YMMV!
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Old 12-31-2016, 12:51 PM   #59
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I rarely get any useful information from the "net worth" or "spending" polls. It's too hard to compare yourself to others without knowing all the variables to their RE plan. Not sure you can have a useful poll on these subjects unless all variables are constant.
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Old 12-31-2016, 02:00 PM   #60
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From the OP's post it appears what he is looking for is comparing how he is doing to others on the board.

The problem with using net worth is, we are all different.

Examples: All have a net worth of 2 million

A. Has 1.9 mill in the bank and 100,000 is personal property, with no debt. His income in retirement is generated by the 1.9 mill is is $80,000 a year.

B. Has 0 in the bank and no debt and 100,000 personal property. He has $80,000 a year of cola'd income from gov. and tripple A rated companies.

C. Has 1 mill in the bank, 1 mill in assets, 1 mill in debt, but gets $40,000 in cola'd pension, and $40,000 from invested 1 mill.

So,
A has a net worth of $2 mill., and a secure retirement of $80K
B has a net worth of $100K and a secure retirement of $80K
C. has a net worth of $1 mill. a secure retirement of $80K

However, without more information we still cant say A is better off. You see A has a very young new wife and his expenses are well over $80k a year, B is a bachelor and and has expenses of $20k a year, and C has expenses of $80K a year.

So while A has the highest net worth, B the lowest, and C in the middle, if you were to compare their financial situation, B with a $0 net worth, is the best off. But this may not even be true, as we did not know that B is about to get married, and have an instant family of five, with three kids to send to college!

Bottom line, I know where I am. I am better off than some of my friends and neighbors, and worse off than others. I am 98% sure my retirement is secure, and I will not out live my income. (I really think it is 100%, but hyper inflation, war, some sort of natural disaster etc. might change things. These are out of my control and I just don't really worry about them)

I think I could go on for a long time changing what A, B, and C have, or facing, but you should get the point. Maybe a better number would be "How confident are you in your financial future". For me that number is 98%.
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