Who counts part of their home value as "retirement savings" (pension, weather)
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Q: Who counts part of their home value as "retirement savings"
A: I do not have any retirement savings. In fact, I have zero savings - not one penny. I'm one of those people journalists write about when they say "XX% of retirees have no retirement savings."
I do, however, have significant liquid investments and real estate investments. But no savings.
I am another one, or was. I actually was able to start saving around 60, 61 and had a few thousand in my account, and then my mother died. All she really had was her house and a couple of small savings accounts, and we always thought her house would go to pay for nursing home care when she got to a point where she could no longer stay home, so no one expected to ever inherit anything. She'd deteriorated physically in her last six months after a fall, and the day was coming when we could no longer care for her at home. Then she died in her sleep in the house where she'd lived for 63 years.
We sold her house earlier this year, and even though the money was divided eight ways, I still got something to put into a savings account.
Now I am taking the investing basics for idiots online course on the Ameritrade site. It's amusing, because it talks about saving for retirement for 30 years, and well, too late for that. It's OK, I have a pension, and in another three years I'll apply for Social Security. There's no scenario that really applies to someone like me who is already retired and learning to invest. But it did say you don't count the equity in your home as part of your net worth. I still have an $88K mortgage on a condo worth around $225K.
I really just consider that having a place to live, though.
I do not count value of our current home as retirement savings. It's like paying rent at this point as we just took out a mortgage last year, and have virtually no equity in it, other than what Zillow says we could sell it for today. But then we have to go find another place to live.
If we sell it and liberate whatever equity we have, then I don't think I would count that either unless I had another, paid for house.
I agreed with the camp that does not count home equity as retirement savings.
I further differentiate between "retirement savings" from "retirement income" and from "net worth".
Retirement savings is the CASH I have in savings, checking, or investment accounts. It could be in the form of roll-over IRA, Roth, etc. I can easily access it in the matter of days.
Retirement income is the CASH FLOW I can expect. This can be in the form of SS, pensions, or other investment income such as dividends, rentals, etc.
Net worth is really a PAPER NUMBER. It includes the equity I have in the properties I hold but can not be easily converted to cash.
I count it as a potential source of HELOC if I need a big bunch of cash urgently, or a hedge against hyperinflation (ie, something that could be sold at very inflated price following an interval of high inflation), or as something that I can monetize if I need to move to chronic care, or if I reach my 90s without evidence of impending death. I do not count it as something to use for usual ongoing expenses in the next 30 years.
What are "retirement savings"? People generally refer to "retirement income". I have retired on layered annuities, but those are not retirement savings. While I worked, I used my savings to purchase a number of annuities from insurance companies, but those are no longer my savings - I paid them to insurance companies, which now (and will in the future, in gradually increasing amounts) pay me a monthly check. That check is for monthly expenses, ie, no saving, I am done with that.
Btw, my retirement income is from sources that cannot be routinely accessed, withdrawn as a bulk sum, or scammed. Having been a victim of identity theft a few years ago, I am now wary of keeping much cash (aka savings) anywhere where my physical presence and at least notarized documents are not required for major withdrawals of funds (ie, I do not consider large bank accounts safe, particularly if accessible with a plastic card. I have one single credit card, no debit cards, and one single ATM card linked to a single account which usually contains only enough funds for payment of upcoming electronic bills plus maybe about $200 maximum).
I agreed with the camp that does not count home equity as retirement savings.
I further differentiate between "retirement savings" from "retirement income" and from "net worth".
Retirement savings is the CASH I have in savings, checking, or investment accounts. It could be in the form of roll-over IRA, Roth, etc. I can easily access it in the matter of days.
Retirement income is the CASH FLOW I can expect. This can be in the form of SS, pensions, or other investment income such as dividends, rentals, etc.
Net worth is really a PAPER NUMBER. It includes the equity I have in the properties I hold but can not be easily converted to cash.
Someone who has 200,000 in savingsd and 1,000,000 equity in a home is better situated for retirement than someone who has 700,000 in savings and no home equity.
I count my equity as retirement savings because I didn't plan well and need to count it. But that is a different story.
Someone who has 200,000 in savingsd and 1,000,000 equity in a home is better situated for retirement than someone who has 700,000 in savings and no home equity.
I count my equity as retirement savings because I didn't plan well and need to count it. But that is a different story.
Perhaps, but with this case, other important factors come into play. The one with 700K in savings and no home equity could easily become one with 200K in savings and 500K in home equity with a paid-off new house. In this case income streams and COL become the deciding factor as to who is better off, since the differentiation is much less distinct between the two scenarios. Typically, the 1,000,000 house will be in a much higher COL area, leveling the playing field.
Someone who has 200,000 in savingsd and 1,000,000 equity in a home is better situated for retirement than someone who has 700,000 in savings and no home equity.
I count my equity as retirement savings because I didn't plan well and need to count it. But that is a different story.
If you need to access that $1M equity it can not easily be done.
You'll either have to sell your home, refinance, or take out a HELOC. In any case, it will cost you or take some time. IMO, it's more appropriate to call it your "nest eggs". You can a cess it if needed but it will take some effort & time.
Both cash-out re-fi and HELOC are considered incurring a NEW DEBT. You'll need to pay it back. Something to think about.
I never count anything that isn't easily made liquid. How do you know that when you need to sell, the market will allow for a fast sale at the price you have been counting on?
And how do you know the new owner of the house would want to rent it back to you? Every time I've sold a house, the new owner could hardly wait until the ink was dry to get in there. Where we live now, if we sold our house, even though we would make some profit, we'd have a difficult time finding a new place to live, let alone one that is half as nice as where we are.
In my zip code, listing to closing is usually around 6 weeks unless it’s a cash buyer where it’s quicker. A house is quite liquid unless it has huge problems or it’s priced wrong.
To use the mathjack phrase, I can always sell and move the Cheapsville. I count my primary residence as part of my net worth. I also count the condo at a Colorado ski resort. That’s just as liquid. What’s not all that liquid is my tax deferred retirement portfolio. If I needed a big pile of money in a hurry, I’d get crushed on taxes. Long term capital gains is my friend.
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