Reply to Question for those of you to track your net worth

Forum Index » Money and Finances

Reply to "Question for those of you to track your net worth"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=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.

[/quote]

OP.. It's simple and practical to keep track of just your liquid net worth (exclude RE; include 529) for retirement planning at full value. All assets ( (except Roth IRAs) have a tax liability attached to them, unless managed, and it gets cumbersome if you start factoring that in. 65+ retirees get additional tax deductions and you could withdraw 100K+ and get away with paying zero to very low tax. Deal with taxes as an expense. If you need to spend, say $200K/yr in retirement, plan on a 20% overall tax on your withdrawal vs. reducing your assets by 35% and zero tax in retirement.

I know some pedantic idiot will come by to yap about my treatment of 529 and RE. Here's how to deal with it:

529 - Treat the balance as an asset and withdrawals as an expense. The money you have is yours, any balance left over is yours as well to gift your grandkids later, or just withdraw, pay penalty and spend. Excluding it makes no sense.

RE - You always need a roof over your head. If your have "excess RE" (live in a fully paid off $4M house but can easily downsize to a $1M house, have investment property, etc), by all means include that excess into your net worth. Otherwise ignore. Treat mortgage payments as an expense.

[/quote]

Except your full home you live in is part of your NW.  You could sell that $1M and rent or move to a much smaller place.  You have choices
[/quote]

Absolutely! That was just an example. If that threshold is $200K for you, then treat the excess above that as part of your net worth. [/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics