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Location: Formerly Pleasanton Ca, now in Marietta Ga
10,348 posts, read 8,567,170 times
Reputation: 16693
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Quote:
Originally Posted by mathjak107
not really , because under anything but worse case outcomes , the likes of which we have not seen since 1966, you need to take raises .
even under average outcomes the draw would be about 6% inflation adjusted . no one draws like a robot every year .
if you drew only 4% inflation adjusted , 90% of the time you would die with more than you started . 67% of the time you would die with 2x what you started with and 50% of the time you would die with 3x what you started with . so that would be a terrible waste of money that could be enjoyed and used. so raises are important along the way .
So what is the best way? It seems all I heard was use the 4 percent rule in these and other forums?
As far as net worth, I figure if I sold everything I own , paid whatever debt I had, and was sitting on the street with what was left that would be my net worth. I agree with you there.
You wouldn’t need to go through the ridiculous exercise of selling everything as the calculation for determining net worth doesn’t require it
Quote:
I'm not sure how you figure out that the value of a house is only in selling when it comes to retirement. If a house is fully paid off it can go up in value. A common misunderstanding about rental real estate is that you only make money when you sell it and that's if it's worth more than you paid.
But if it throws out a 13% cash return every year why would you not count it as a retirement income if that is the plan? Why would you sell that house unless by cashing out you can beat the 13% yearly return you would get the rest of your life?
I said the value shouldn’t be included in retirement planning unless you planned on selling. I did not mention income production because I was talking about the value of said house
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,348 posts, read 8,567,170 times
Reputation: 16693
Quote:
Originally Posted by Lowexpectations
You wouldn’t need to go through the ridiculous exercise of selling everything as the calculation for determining net worth doesn’t require it
I said the value shouldn’t be included in retirement planning unless you planned on selling. I did not mention income production because I was talking about the value of said house
Still not understanding your points.
My point is the value of the asset is what you could get for it if you sold it, not that you had to sell it to figure it out. How are you figuring the value of an asset?
Since you claim the value of a house shouldn't be included in retirement planning unless you are selling, does the same apply to a stock portfolio too? You don't count its value unless you are selling it all?
So what is the best way? It seems all I heard was use the 4 percent rule in these and other forums?
the 4% safe withdrawal rate is only really used to ball park first year . it is far to conservative under anything better than worst case . it is based only on assets that can be sold on the spot as well as can be rebalanced . it is the equivalent of gas mileage in a laboratory under controlled circumstances.
i use bob clyatts 95/5 method which is dynamic and considers actual good and bad years so all raises are built in.
every jan 1st i look at the balance and take 4% OF THAT YEARS BALANCE AND PUT IT IN THE CHECKING ACCOUNT .
if markets are down , you get the higher of : 4% of the actual balance or 5% less then the prior year .
it works well , you get your raises instantly but never really have to take a big hit if markets plunge .4
other methods use buckets . you have say 7 years short term money , 7 years in intermediate term and all the rest in equities .
whenever markets are up you can sell some equities and refill the buckets . you can see calculating real estate in this other then as income is not practical . you can't put the living room in the cash bucket .
Last edited by mathjak107; 11-17-2018 at 04:08 AM..
As far as net worth, I figure if I sold everything I own , paid whatever debt I had, and was sitting on the street with what was left that would be my net worth. I agree with you there.
I'm not sure how you figure out that the value of a house is only in selling when it comes to retirement. If a house is fully paid off it can go up in value. A common misunderstanding about rental real estate is that you only make money when you sell it and that's if it's worth more than you paid.
But if it throws out a 13% cash return every year why would you not count it as a retirement income if that is the plan? Why would you sell that house unless by cashing out you can beat the 13% yearly return you would get the rest of your life?
brick and mortar real estate is not really passive income . it is more akin to a business . why do people sell business's when they retire ?
because they want only liquid ,passive investments and no headaches from the business , in this case tenants and property issues . .
Still not understanding your points.
My point is the value of the asset is what you could get for it if you sold it, not that you had to sell it to figure it out. How are you figuring the value of an asset?
Since you claim the value of a house shouldn't be included in retirement planning unless you are selling, does the same apply to a stock portfolio too? You don't count its value unless you are selling it all?
only the income from real estate is counted for retirement purposes just like a business . why ? you cant rebalance the living room and liquidate it to refill cash and bonds as they need refilling for selling .
if you sell it and put the money in to something highly liquid and something you can rebalance then it gets counted.
a retirement portfolio has yearly rebalancing to create spending cash
As far as net worth, I figure if I sold everything I own , paid whatever debt I had, and was sitting on the street with what was left that would be my net worth. I agree with you there.
I'm not sure how you figure out that the value of a house is only in selling when it comes to retirement. If a house is fully paid off it can go up in value. A common misunderstanding about rental real estate is that you only make money when you sell it and that's if it's worth more than you paid.
But if it throws out a 13% cash return every year why would you not count it as a retirement income if that is the plan? Why would you sell that house unless by cashing out you can beat the 13% yearly return you would get the rest of your life?
the proper way to figure rental properties is to treat the income the way you would social security and pension .
so if you need 100k income and have 20k in pension ,20k in rent and 20k in ss you need 40k from your liquid sources (portfolio) .
you then would stress test 40k in something like firecalc over as many years as you want it to last and find an allocation that gives you a 90% success rate .
if you don't want to use that high of an allocation to equities , usually 40 to 60% then you need to spend less or save more and reduce the allocation until you hit 90% success.
Still not understanding your points.
My point is the value of the asset is what you could get for it if you sold it, not that you had to sell it to figure it out. How are you figuring the value of an asset?
You were over complicating net worth.
Quote:
Since you claim the value of a house shouldn't be included in retirement planning unless you are selling, does the same apply to a stock portfolio too? You don't count its value unless you are selling it all?
If you planned on never selling then yes for retirement planning purposes. It’s much easier to sell 4% of a stock portfolio than 4% of a house
the 4% safe withdrawal rate is only really used to ball park first year . it is far to conservative under anything better than worst case . it is based only on assets that can be sold on the spot as well as can be rebalanced . it is the equivalent of gas mileage in a laboratory under controlled circumstances.
i use bob clyatts 95/5 method which is dynamic and considers actual good and bad years so all raises are built in.
every jan 1st i look at the balance and take 4% OF THAT YEARS BALANCE AND PUT IT IN THE CHECKING ACCOUNT .
if markets are down , you get the higher of : 4% of the actual balance or 5% less then the prior year .
it works well , you get your raises instantly but never really have to take a big hit if markets plunge .4
other methods use buckets . you have say 7 years short term money , 7 years in intermediate term and all the rest in equities .
whenever markets are up you can sell some equities and refill the buckets . you can see calculating real estate in this other then as income is not practical . you can't put the living room in the cash bucket .
You keep a whole years spending in the checking account? What if there’s leftover from the prior year? What if it’s December and you are out of funds?
I think that method would drive me nuts watching my checking balance.
if we run short our next line is an ultra short bond fund so we can refill instantly . we generally don't run short as we never spend every penny plus we have some money at local banks so really never a problem . it is like we bought a new car for cash this year . we clicked and refilled and done .
Last edited by mathjak107; 11-17-2018 at 10:38 AM..
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