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Anonymous wrote:I understand that it is part of the definition. But I’m not spending that money during retirement so I don’t count it. The same way I don’t count the 529’s, which are also massive.

Our house is paid off. Not having a mortgage does matter for retirement planning.

So is ours, what is your point? It’s still not throwing off income the way that investments do. The only way it creates income is buy selling it or borrowing against it, neither of which I’m going to do. Therefore it’s not part of my retirement income plan.

But if you need to you can sell it and move to something smaller/cheaper. Many people are still living in large homes their raised their families in. They can 100% get something smaller for less if they need to.
And if you need to sell the home and move to a retirement facility, you can use the home value as you own it.

I could but the whole point is I don’t want to so I’m saving accordingly. If you have to sell your house to afford your life you are overextended.

That is one opinion. But the fact remains, your home value is Part of your networth, and could be sold if needed.

But I agree, we don't consider our two homes that we fully own in our retirement calculations, as we purchased recently and those are ones we plan to live in thru retirement (as our health allows).

But once your health doesn’t allow, they will be sold and used to fund assisted living. Thus, an asset and part of your net worth.

Definately! I agreed with you on that!

In our case, they 99% likely won't need to be sold to fund LTC and will go to our kids if they want them.

We are definitely counting it. We aren’t retiring in place . We will sell our primary home and retire in our vacation home in Florida. Our home is worth 1.8m today and will be paid off when we retire.

Anonymous wrote:What difference does it make? Who is asking for your “net worth” anyway?

Insurance company wants to know my net worth for life insurance and umbrella insurance policies.

Anonymous wrote:I see a lot of folks saying not to do this. IMO, the main issues would be whether a) you live in a very expensive home vs cheap home (or HCOL vs LCOL) and b) willingness to relocate or downsize in retirement. It's much easier to utilize the equity in an expensive multi million dollar house than a cheap 500k house for living purposes. If you live in a city like DC, NYC, SF you can easily find a bigger property in a cheaper area for a fraction of the cost. What's the harm in including a 3M townhouse in your NW if you intend to sell it eventually and downsize to a 500k property in another state (or country)?

I know some people can't imagine not living in a major city, but many of us are only here for economic opportunities and couldn't care less for the culture or amenities.

This topic has been rehashed a thousand times here.

I personally don't since I live in a house valued at about $1m, with a $250K remaining mortgage. If I do choose to sell, I may net $650K which will go right into another house. Kinda pointless tracking value and mortgage balance year over year for things to net out.

If I were living in a house valued at $4M with zero mortgage AND I definitely plan on moving to a low cost area into a nice house worth $1M, then I would include the excess RE ($3M) in my net worth. Same goes for any rental properties.

The pedantic among us will always want to include primary residence as part of net worth and show the remaining mortgage as a liability, because "that's what the textbooks say". If that makes you happy, go for it. I have $10M+ financial assets so adding or not adding the $650K RE ain't gonna make my d*ck any bigger. But you do you.

Anonymous wrote:We bought with a 400K down payment a few years back. Our house has appreciated a little bit. If I wanted to sell tomorrow I'd get that 400K + more back in a month or two (yes, even taking closing costs and commissions into account). So yeah, it's as much a part of my NW as my investments are, neither of which are 100% guaranteed returns until they're liquidated.

As it should be! yes you need a place to live, but that doesn't need to be a $2M home.

Anonymous wrote:Puzzling that people think only assets that throw off income can be included in one's net worth.

What about gold bars, high value artwork, etc.?

Officially yes you should include those. however our 200K+ of artwork is a blip on the overall total, so I don't usually list that or the value of vehicles (that could be sold). But officials you should. If you drop dead, they will be sold and added to your estate

Anonymous wrote:We bought with a 400K down payment a few years back. Our house has appreciated a little bit. If I wanted to sell tomorrow I'd get that 400K + more back in a month or two (yes, even taking closing costs and commissions into account). So yeah, it's as much a part of my NW as my investments are, neither of which are 100% guaranteed returns until they're liquidated.

Yeah but don’t you need that money to find another place to live?

I count it as net worth but not in my retirement number calculations. I have about $1.5 million in real estate equity. I plan on selling those properties at retirement but replacing with similarly valued properties so that’s money I won’t be able to touch unless there’s an emergency. The value of those properties are in my estate but it’ll be tied up. I want a northern and a southern house at retirement.

Of course your retirement accounts are part of your net worth.

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Anonymous wrote:Puzzling that people think only assets that throw off income can be included in one's net worth.

What about gold bars, high value artwork, etc.?

When people ask about our NW, we only include our non-earmarked liquid assets. This is the truly meaningful amount and omits anything that provides utility or is set aside for a future expense: functional NW as opposed to technical NW.

In this functional NW number, we exclude our home, cars, personal property, 529 plans, retirement accounts, and HSAs. In our experience, the more affluent people all do the same thing. It is the upper middle class and below that tends to inflate their NW estimates using any means available to keep up with the Joneses.

We’re in our early 40s and have a functional NW – by our practical definition – of about $10M. If we include ALL ASSETS and ALL LIABILITIES, our technical NW is closer to $300M.

Technical net worth = net worth (reality)
Functional net worth = what you pretend your net worth is to avoid paying taxes or tipping your servers

Is that about right?

We bought with a 400K down payment a few years back. Our house has appreciated a little bit. If I wanted to sell tomorrow I'd get that 400K + more back in a month or two (yes, even taking closing costs and commissions into account). So yeah, it's as much a part of my NW as my investments are, neither of which are 100% guaranteed returns until they're liquidated.

Anonymous wrote:Puzzling that people think only assets that throw off income can be included in one's net worth.

What about gold bars, high value artwork, etc.?

When people ask about our NW, we only include our non-earmarked liquid assets. This is the truly meaningful amount and omits anything that provides utility or is set aside for a future expense: functional NW as opposed to technical NW.

In this functional NW number, we exclude our home, cars, personal property, 529 plans, retirement accounts, and HSAs. In our experience, the more affluent people all do the same thing. It is the upper middle class and below that tends to inflate their NW estimates using any means available to keep up with the Joneses.

We’re in our early 40s and have a functional NW – by our practical definition – of about $10M. If we include ALL ASSETS and ALL LIABILITIES, our technical NW is closer to $300M.

Puzzling that people think only assets that throw off income can be included in one's net worth.

What about gold bars, high value artwork, etc.?

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I understand that it is part of the definition. But I’m not spending that money during retirement so I don’t count it. The same way I don’t count the 529’s, which are also massive.

Our house is paid off. Not having a mortgage does matter for retirement planning.

So is ours, what is your point? It’s still not throwing off income the way that investments do. The only way it creates income is buy selling it or borrowing against it, neither of which I’m going to do. Therefore it’s not part of my retirement income plan.

But if you need to you can sell it and move to something smaller/cheaper. Many people are still living in large homes their raised their families in. They can 100% get something smaller for less if they need to.
And if you need to sell the home and move to a retirement facility, you can use the home value as you own it.

I could but the whole point is I don’t want to so I’m saving accordingly. If you have to sell your house to afford your life you are overextended.

That is one opinion. But the fact remains, your home value is Part of your networth, and could be sold if needed.

But I agree, we don't consider our two homes that we fully own in our retirement calculations, as we purchased recently and those are ones we plan to live in thru retirement (as our health allows).

But once your health doesn’t allow, they will be sold and used to fund assisted living. Thus, an asset and part of your net worth.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I understand that it is part of the definition. But I’m not spending that money during retirement so I don’t count it. The same way I don’t count the 529’s, which are also massive.

Our house is paid off. Not having a mortgage does matter for retirement planning.

So is ours, what is your point? It’s still not throwing off income the way that investments do. The only way it creates income is buy selling it or borrowing against it, neither of which I’m going to do. Therefore it’s not part of my retirement income plan.

But if you need to you can sell it and move to something smaller/cheaper. Many people are still living in large homes their raised their families in. They can 100% get something smaller for less if they need to.
And if you need to sell the home and move to a retirement facility, you can use the home value as you own it.

I could but the whole point is I don’t want to so I’m saving accordingly. If you have to sell your house to afford your life you are overextended.

That is one opinion. But the fact remains, your home value is Part of your networth, and could be sold if needed.

But I agree, we don't consider our two homes that we fully own in our retirement calculations, as we purchased recently and those are ones we plan to live in thru retirement (as our health allows).