or…
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We’re back to this:
“Why is the stock market up?”
“Because it’s open.”
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Might be notching a second Dr.Evil in TNW if this keeps up for a bit longer.
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TNW rebounded back over the Double-Dr-Evil today (2.006M) after a brief tumble during the Japan brouhaha
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I’m now back to a new all-time high NW. Recession cancelled.
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When y’all calculate net worth, curious how you deal with a few things:
- House. Do you include (or go Sheba style and mark it zero?). If so, do you include taxes if house has appreciated past allowance?
- 401k, what tax rate do you apply?
- Brokerage, do you include anticipated capital gains taxes?
- I have a defined benefit pension, would you include that?
- I argue that NW definitionally includes home equity. However, when I think about retiring I sort of mark it zero. I know my housing expense will be taxes, insurance, and maintenance, but zero mortgage.
- I just use the gross number. As I get closer to retirement I will have to start estimating taxes and adding that into the expense side of the ledger.
- Same, gross number
- Not sure. Again, for planning purposes it should be included as income. If you wanted to do some manner of NPV calc on it, seems rational to do so. I think for a ‘pure’ NW calculation it makes sense to add it in some fashion.
In general, I often use the 4% rule in both directions as I think about high-level retirement planning.
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For what purpose do you need your net worth to be so defined?
Even if I had a specific threshold like “I want $X.Y million before I retire”, that $X.Y million has already been decided based on my expectations for tax, whether I intend to die in or sell my home in retirement, etc.
If I’m in 100% Traditional retirement savings, $X.Y million will be higher than if I’m 100% in Roth. If I have a pension, X.Y is lower.
For net worth, I’m not factoring in things like taxes. I’m taking net home equity. It’s a balance sheet position. For monthly/yearly/retirement expense planning, then you are looking at inflows and outflows of cash, that will of course need to consider taxes.
- There are two different numbers, but of course I don’t expect to rely on spending my home’s equity (although selling it and accessing what’s left of the $330K would give me a number of additional years if I found it necessary to rent or downsize). I generally only use the excluding home equity number.
- Use the gross number. For me that’s 1.68M (up 47K since retiring in March yay) of which 44% is Roth. 4% of that is $67,200. A decade from now Social Security should add $40,000 but that could get a haircut, so mark it 1/2 or 2/3 if you like. If I were to consistently use the same proportion of Roth, my taxable income would be only $37,632 and that’s before that standard deduction of $29K so as you can see I don’t plan on paying a lot of tax.
- This only affects my taxable investment fund ($239K) and if I can be bothered to hold a stock for 12 months (which sadly isn’t that often), with my tax brackets the capital gains tax is ZERO. No doubt many of you will get taxed more highly on your obscene wealth
- Simply recognize the expected income. I want $8K a month before tax, my pension is $2K per month, so now I need $6K per month or $72,000 x 25 = $1.8M excluding SS.
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I need to think through this kind of math more as I get closer to retirement. I’d like to start doing Roth conversions in the early part of retirement, because I’ll be living off of brokerage dollars and will have low ‘income’ there, so I should be able to convert qualified dollars to Roth at very low tax rates.
On the whole, you and I are similarly conservative, lol. I haven’t included SS in my future income even though I expect a worst case of the 28% (I think?) haircut. And we have a 3,200 sq ft house, I imagine at some point we will downsize and pocket some cash plus reduce our utility and maintenance costs. I’m planning on using the 4% rule plus having those added backstops and, like you, probably doing something to drum up a little actual income.
To answer Rastiln’s question, to be honest, I do not really need to calculate a net worth, as I do have a retirement planning calculator I built that is more involved. Sadly, tomorrow is not the retirement date.
What got me curious is reading an article today in WSJ talking about gen X (which I am on the very tail end of) and preparedness for retirement. They was discussion of net worth, was wondering if there was a common definition of it.
I do have a spreadsheet I update monthly with a column labelled “net worth”. It is without house, but all gross no tax implications (and not counting the pension). We live in a very high COL area, so home is a big number, but if we never move, does not really matter.
I am past saving for retirement so the only time I think about net worth is for estate planning purposes. The PV of our DB pensions after we die will be zero so that is an easy calculation!
The house is an important component as we would like somehow for it to be passed on to one or more of our kids. That is where the non-house savings components on an after-tax basis become relevant: can one or more children buy out the others with their inheritance?
Just thought I’d revisit one of the first thirty or so posts from this thread, from November 2020. At this time I would have had $1.07M.
Thank goodness I revised this estimate.
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So 1.07 to 1.68 in 3.5 years? Were you plowing away a lot of new savings or was most of that gains?
Dad died at the end of 2022. I was sitting at 1.15M and that small inheritance in early 2023 bumped me closer to 1.30M Suddenly 1.5M was not far off, and during some down time at work I calculated if 1.5M would be enough to pull the trigger. The stock market roared forwards from then on. I was only living on about half of my gross and just stashing everything else away - and wasn’t putting kids thru college.
| DATE | TOTAL | xHouse |
|---|---|---|
| 12/31/2020 | $1,287,611 | $1,073,148 |
| 12/31/2021 | $1,560,240 | $1,297,683 |
| 12/31/2022 | $1,438,848 | $1,151,229 |
| 12/31/2023 | $1,809,934 | $1,494,236 |
| 3/31/2024 | $1,954,333 | $1,632,614 |
| 6/30/2024 | $1,972,519 | $1,636,338 |
| 8/21/2024 | $2,016,463 | $1,680,665 |
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So on track to roughly double in 5 years. I feel like i might be hitting my number sooner than i expect.
For retirement planning purposes whether or not you include your home equity would depend on your plans for your home in retirement.
Are you going to sell your $700,000 house and move into a $400,000 house? Call that $300,000.
Are you going to stay in your existing house until you croak? Mark it zero.
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That is how I have valued it. Just hoping that I actually can live in our house until they carry me out.
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I figure my house is my emergency exit.
It’s currently worth around $500k, so almost surely will be at least $600k by my retirement.
I don’t have a number for my account to hit to be ready to retire, but when I do, I’ll likely plan to die in my home.
Should I be running out of money, $600k pays for me in a nursing home for some 15-25 years, or longer in a modest apartment. If I don’t run out of money, my kids can enjoy it.
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