Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I agree with your premise (my retirement home is 100% financed) but not your numbers. The spread is much thinner in reality. To presume a 60/40 allocation will yield 7.5% is unrealistic. For me, having total access to my funds is the major advantage.
today we can't presume more equities leads to higher returns . it has not been that way for 20 years .
3 down turns in 20 years has been the great equalizer and portfolio's with less equities than 60/40 but with assets that can gain more in down markets and be rebalanced buying more equities have actually done better the last 10 and 20 years ... will it repeat ? beats me ... but it seems by retirement the smart thing to do is allow for it rather then try to rule it out in the plan by still swinging for the fences or using old school thinking .
Yes, but if the house is paid off, you are living with minimal housing expenses as compared to the retiree who will have to keep sending in rent payments
I amend my comment about considering home equity: what you should factor in is if you have a paid off house. Again, the example asking who is in better shape:
1) The 65-year-old with $600k in investments and a paid-off house of $600k (net worth $1.2 million)
2) The 65-year-old with $600k in investments, no home ownership, and rent payments (net worth 600k)
I just don't see how one can ignore one's ownership of property when evaluating his overall financial situation.
all our housing costs are separate from our investment vehicles
i can rent a studio for way way less then owning a paid off home in the tristate area .... so housing costs are one aspect .
how the house does as an investment vs alternative investments is a separate issue ..
you need to look at both together to draw any kind of conclusion .
my housing costs renting are higher then owning an equivalent co-op .. however my investments outperformed owning that co-op by such a wide margin that i could buy 2 of them today .
so looking at both parts renting for us has been far superior in combination .
If you're truly at the far end (rather than just avoiding the underlying)... good for you.
As with jrkliny, I wish you both all the happiness and satisfaction you can stand.
I'm not avoiding the underlying. If someone has a house they can sell it if they want (assuming someone in the market will purchase it). They still need to live somewhere and there will be a cost associated with living somewhere.
Unless they rent out the house or sell it or do a reverse mortgage, the house itself will not otherwise provide any cash flow. Cash flow is a crucial part of preparing for retirement.
mr rational- there is a difference between calculating net worth for other purposes vs calculating liquid assets to establish a portfolio draw based on equities bonds and cash
But you're comparing individuals with the same net worth, which is something else entirely.
The question was whether home ownership should be a factor. So let's say I'm have $600,000 on the eve of retirement and my friend has the same. Difference is: I own my own house, and she is renting (paying $2000 a month in a so-so neighborhood).
I am clearly better off financially than she is. You can't just ignore the fact I own my own house. It will save me on rent payments (lowering my monthly expenses) and does provide an emergency fund since I can always sell it to raise cash.
Suppose your friend is paying $2000 per month for either rent or a mortgage but also has $2 million in savings. Who is better off? Your "logic" has no bearing on this discussion. If you want to compare two courses of action, then you need to start from the same point at the beginning of the decision.
I agree with your premise (my retirement home is 100% financed) but not your numbers. The spread is much thinner in reality. To presume a 60/40 allocation will yield 7.5% is unrealistic. For me, having total access to my funds is the major advantage.
I did not make up the 7.5% figure. That is an historical average which of course could change in the future for better or worse. I took out a mortgage at age 68, a few years after I retired. For the first two years of my mortgage, my investments returned much greater than 7.5%. In fact returns were over 10%. The next year was barely break even. Then there was another 7.5% average year, then a year with returns of less than 4%. Who knows what 2019 will bring but so far so good.
helocs were closed in many cases because banks had no more money to loan , regardless of equity .. my sisters was closed and she had plenty of equity ... ...we sold two co-ops in 2009 here in nyc ... both took 6 months to close on because after sending commitment letters , when the closing dates came the lenders said they had no funds to loan ... this happened repeatedly with multiple banks that were tried
so helocs were closed in many cases regardless..
today you need to have the same criteria to get a heloc as a mortgage .. run in to trouble credit wise with medical debt and you can be denied a heloc .
Interesting. Mine was closed because we didn’t use it. It’s just a back up plan, just in case.
Last edited by NewbieHere; 03-02-2019 at 09:10 AM..
today we can't presume more equities leads to higher returns . it has not been that way for 20 years .
3 down turns in 20 years has been the great equalizer and portfolio's with less equities than 60/40 but with assets that can gain more in down markets and be rebalanced buying more equities have actually done better the last 10 and 20 years ... will it repeat ? beats me ... but it seems by retirement the smart thing to do is allow for it rather then try to rule it out in the plan by still swinging for the fences or using old school thinking .
Good to know. People on Bogglehead forum talk as if investing in equities is one way street, in fact some here too, one way up. Otherwise they think they leave too much on the table.
Last edited by NewbieHere; 03-02-2019 at 09:50 AM..
Many examine and chart the 'sequence of returns risk,' justifying the safety of a fixed 4-6-percent withdrawal rate over a potential 30+-year retirement. The baseline objectives in these calculations seem to be either "without eating-up the principle" or "without running out of money during one's expected lifetime.'
Two dynamics rarely factored-in are -rising inflation rates and -reduced acquisition/need in the 15-30-year time frame. (Perhaps these offset each other(?)). A third issue is the ratio of retirees largely (60%+) dependent on this 4-6-percent withdrawal for the bulk of their required income. Of course, there are also unexpected issues (health, financial bubbles, etc) that can also upset the 'apple cart.'
While most "experts" embrace (and justify) 4-percent as a 'safe number,' one wonders if the actual average withdrawal rates of retirees bear-out these assumptions. Or, do many retirees, like us, depend on other sources of income - which skew the 'safe' withdrawal percentage. (10-years into retirement, we're just now starting to tap into our retirement savings (with RMD's that will average 4-8-percent withdrawal (not spending) over the ensuing years).
I'm quite aware of this tyvm.
The point is about sequencing the discussion underlying our financial planning.
eg: Start with the 'generally accepted accounting standards' view of the books
before considering what machinations or maneuvers might also be available.
This is especially important for those closer to the ragged edge listening to hype;
let alone the input of those inclined to spend down to ZERO rather than conserve a legacy.
They may still be forced to spend it all down but NO ONE should start planning with that assumption.
Quote:
Originally Posted by jghorton
While most "experts" embrace (and justify) 4-percent as a 'safe number,'
one wonders if the actual average withdrawal rates of retirees bear-out these assumptions.
Or, do many retirees, like us, depend on other sources of income - ...
Yes. Which neatly melds in with these points:
that all the assets and all the income from whatever source has to be considered as a whole
so that whatever the nature of the expenses they can also be considered as a whole.
If you're living so large that you can THEN go beyond the basic measures... wonderful.
But I suspect that more are attempting to manipulate or cherry pick the numbers they use.
And, it appears, too many do so in order to make their desires seem more practical than they objectively are
considering just how much Net Worth they actually have and how much they can expect it to yield.
Last edited by MrRational; 03-02-2019 at 09:43 AM..
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
