Question for those of you to track your net worth

[Anonymous]

How do you deal with 401k assets? Do you include them in your net worth pre-tax or do you apply a factor to reduce their value to account for taxes when you ultimately withdraw?

Right now, I multiply my 401k assets by .65 to account for future taxes.

[Anonymous]

I like feeling rich, why would I want to make myself feel poor?

[Anonymous]

NW is calculated without regard to tax liabilities. The effective tax rate is unlikely to be 35%, even if the marginal is.

I don’t subtract 20% on my taxable brokerage. If our house ever exceeds 500k appreciation, I won’t start deducting that.

I don’t reduce my salary to post-tax

[Anonymous]

I wasn't crazy enough to put money into 401k.
Tax on my taxable account is only state tax if applicable.
My post tax salary is higher that pre-tax.
As for OP, yes, keep in mind the taxes you need to pay, be it 35%.
Try to lower your tax liability. Then you don't have to worry about it too much.

[Anonymous]

Anonymous wrote:I wasn't crazy enough to put money into 401k.
Tax on my taxable account is only state tax if applicable.
My post tax salary is higher that pre-tax.
As for OP, yes, keep in mind the taxes you need to pay, be it 35%.
Try to lower your tax liability. Then you don't have to worry about it too much.

How did you achieve it ?

[Anonymous]

Anonymous wrote:I wasn't crazy enough to put money into 401k.
Tax on my taxable account is only state tax if applicable.
My post tax salary is higher that pre-tax.
As for OP, yes, keep in mind the taxes you need to pay, be it 35%.
Try to lower your tax liability. Then you don't have to worry about it too much.

Why is it crazy to put money in a 401k?

[Anonymous]

Anonymous wrote:I wasn't crazy enough to put money into 401k.
Tax on my taxable account is only state tax if applicable.
My post tax salary is higher that pre-tax.
As for OP, yes, keep in mind the taxes you need to pay, be it 35%.
Try to lower your tax liability. Then you don't have to worry about it too much.

Good point to be aware of tax impact. And to be tax diversified.

However, your income must be relatively low. My income is high so I expect my tax bracket to be higher now than in retirement. Perhaps 24% in retirement rather than 37% now.

Also, you don’t acknowledge capital gains tax. Yes, it is lower and just on gains, but it is part of the equation.

And as others said, if you are in the 35% bracket for 401k withdrawals, that is the marginal rate.

[Anonymous]

How do you account for real estate? I purchased for 650K but similar houses are going for about 1M b/c of raise and rebuild.

[Anonymous]

Pretax balance, OP. Tax question is a separate question.

[Anonymous]

Op here.

Thanks for the responses. Shouldn’t a net worth be what you could actually realize if you had to sell everything?

[Anonymous]

Financial advisors always use pretax totals

[Anonymous]

Anonymous wrote:Op here.

Thanks for the responses. Shouldn’t a net worth be what you could actually realize if you had to sell everything?

Why? Why would anyone with a decent sized 401(k) after working many years have to sell everything at once? Explain the scenario. If one of their kids were kidnapped for ransom maybe?

[Anonymous]

Anonymous wrote:Op here.

Thanks for the responses. Shouldn’t a net worth be what you could actually realize if you had to sell everything?

No, I think of net worth as the current balance of assets vs liabilities. I just know that not all of my net worth will be available to me in retirement - some portion of it will have to go to taxes.

So if I want $1m available, I need $1.Xm net worth.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Op here.

Thanks for the responses. Shouldn’t a net worth be what you could actually realize if you had to sell everything?

Why? Why would anyone with a decent sized 401(k) after working many years have to sell everything at once? Explain the scenario. If one of their kids were kidnapped for ransom maybe?

you wouldn't, so use a 401K and let it grow tax free until you need it. Our tax bracket wont go down in retirement, but I don't regret using 401K as a tool. It's 25-30+ years of tax free growth along with company matches along the way.

[Anonymous]

Your tax rate in retirement is unknown, and you don't reduce the value of your taxable accounts by the amount of tax you'd pay if you sold them now, so no. You also don't reduce your net worth by factoring in the potential future impact of inheritance taxes on the value of your estate for your heirs, for the same reason. Your net worth is the value of all your investments, taxable or not, and home equity. If you have unusually valuable vehicles, jewelry, artwork, or other non-financial assets you can include their fair market value if material.