USGrant1962
Thinks s/he gets paid by the post
Equity killed a lot of people too in the last recession.
It wasn't equity that did that, it was leverage.
Equity killed a lot of people too in the last recession.
Agree. We're selling one house to buy another, but pulling ~$130K in equity out of the sale of the house and applying the rest as downpayment on the new place. Thus, of course home equity is part of your net worth, it's just less liquid since you probably can't realize it for a month or more... but it's there.For straight net worth, I include home equity in the calculation...
However, I do not include home equity for the purposes of calculating cash flow to support my basic retirement spend because I'm not intending to generate cash flow from it (via rental, loans, etc).
I'm considering our home equity as a kind of insurance policy if we need additional dollars to move into a retirement home. Kind of overkill but that's how we want to do it.
Agree. We're selling one house to buy another, but pulling ~$130K in equity out of the sale of the house and applying the rest as downpayment on the new place. Thus, of course home equity is part of your net worth, it's just less liquid since you probably can't realize it for a month or more... but it's there.
It'll be interesting for my NW/invested asset spreadsheet where the NW will probably dip a little bit from real estate transaction costs, but invested assets will go up by ~10% from the addition of extracted home equity.
I've referenced the Financial Samurai's "above average person" numbers on many occasions because we all want to see where we shake out compared to our peers. All of the "average American" statistics paint a bad picture. To wit, one of my friends retired from the Navy, and by any stretch he is better off than the "average American", but no where near what he needs to be to support his lifestyle. He even said how he was way ahead of the game compared to the average person, but in reality he'll work until he's 65 to support his expenses. It's just that the average person shouldn't be the benchmark for someone with an MBA, a pension, and country club tastes.
Not here! Most on this forum qualify as Sam's definition of "above average", and just about all of us are "above average" in terms of net worth/invested assets. The MBA/pension/country club was my specific friend who's a bit deluded about his overall financial situation relative to his tastes. He's got RobbieB tastes without RobbieB assets!You think the folks on here that think of themselves as "above average" have country club tastes? We recycle dryer sheets.
I track both investable assets and net worth. I consider everything in my net worth including the lump sum value of pensions and Social Security and home equity. We have to live some place but we could live in a less expensive house if we chose to do so.
I don't include SS, pension or trust fund income.
I would include what the gov't would count if I were to (in theory) apply for Medicaid; that to me is the true consideration of net worth. House, cars, boat and investable assets.
In short, what would be counted should we ever come to (gasp!) means testing.
Pensions aren't counted in means testing for Medicaid? Or am I misreading ?
Pensions aren't counted in means testing for Medicaid? Or am I misreading ?
.... The MBA/pension/country club was my specific friend who's a bit deluded about his overall financial situation relative to his tastes. He's got RobbieB tastes without RobbieB assets!
Income streams are counted in the income stream part of Medicaid but not the net assets part. There is more than one thing that Medicaid looks at when determining eligibility.Or Trust Fund regarding Medicaid. Please give us some details. Thanks
I don't agree with not counting primary residence but I understand and respect the decision not to count as it isn't considered an investment like other assets. However, any computation of NW such as for insurance needs will include it and also your personal belongings like cars, TVs, etc.
However, I don't understand not counting investment property. Real estate both primary and a rental account for about 40% of my NW although both have a mortgage on them. About 30% of NW if you deduct the mortgage balances. Regardless of the mortgages, I still have the full value of the property at risk and when the property value increases each year the mortgage doesn't increase with it. So, I count the full value of real estate in assets and then include mortgage in liabilities.
To me, I'm more likely to loose $value in my stock investments than the real estate. Think of Pan Am, GE, MCI, and these are only some of the stocks that have lost value. I would think stock and bond investments have more downside risk today than real estate.
Just my humble opinion.
Income streams are counted in the income stream part of Medicaid but not the net assets part. There is more than one thing that Medicaid looks at when determining eligibility.
I don't include SS, pension or trust fund income.
I would include what the gov't would count if I were to (in theory) apply for Medicaid; that to me is the true consideration of net worth. House, cars, boat and investable assets.
In short, what would be counted should we ever come to (gasp!) means testing.
Yup... and assets includes the house and liabilities includes the equity so net worth includes home equity... elementary.... unless you are a blogger.
Of course if I include my house when I compute my net worth. But that is not the only number I need to look at.
If I look at how my investments are doing, I exclude my house as I don't expect to withdraw from it or spend part of it any time soon.
When I determined whether I had enough to retire, so that I could have a large enough withdrawal to live on, I did not include the house in that calculation. You have to live somewhere - either you have $$ tied up in a paid off house that you have to sell to extract, or you pay rent/mortgage, which increases your annual income needs.