Who counts part of their home value as "retirement savings" (federal, states)
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We downsized and upscaled 6 years ago.
I see a house as a liability until I have e check in the account.
Dishwasher door gave out last night - enough said?
I would only consider it an asset if I owned it outright. However, there's a caveat even then. How much of an asset it might be isn't something that's totally under my control. You won't know until you close the sale or the homeowner's insurance pays off.
I mentally keep it as an emergency situation asset. We can always move to a smaller home or a townhouse and use excess cash if absolutely needed.
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You home's equity varies with the real estate market. That's about as consistent as the weather.
The same for me.
I don't count what ISN'T realized yet.
Same as not counting my next paycheck til it was DD.
As we have to live SOMEWHERE, it's going to cost us something, unless we've paid it off, and even then, we'll still have property taxes to pay.
And I can tell you there's no way we can rent an apartment for less than our mortgage, it was be at least 50% more than our mortgage!
And we bought in a slump here, and now, at least according to Zillow, it's gone up an estimated 45%. (Not sure I believe it. Again not until it's realized).
I also echo the others, most people buy a house for THEM to live in. You'd have to find someone interested in buying a rental property to make a deal to rent it back.
I count our home equity and rental as part of our net worth. I do not include them when calculating our IRA withdrawals. Should it be necessary, we could sell both the home and rental to pay for long term care. Our current mortgage is approximately 1/3 of the home value. The rental we own outright.
Now I am taking the investing basics for idiots online course on the Ameritrade site.
Depending on your appetite to learn, here's a free online time-tested book called "A Random Walk Down Wall Street" by Princeton University professor Burton Malkiel, now retired (emeritus). It is written for regular people, not a college text book.
Right now, I have a $500K mortgage on a house worth $1.2M (so $700K equity). I have a 15 year mortgage, and my mortgage+taxes is about the same (probably more) than if I were to rent the same house.
So basically, if I sold my house and rented it back from the new owner, I would have around $600K in the bank AND the same $6K monthly payments (for at least the next 15 years or so). So why wouldn't I count that towards my retirement savings?
If I just plan to pay $6K/month (and adjust for inflation) for housing, it seems totally reasonable to count $600K towards my retirement goal (if I have enough other money to last me 15 or so years before I need that money).
Just seems silly not to count it just because I "own" the house
The general answer is do not count it because you have to live some place and the equity is not spendable.
Now I agree if you sell an expensive home and buy a cheaper home the cash you saved increase your equity.
I also agree you can get a mortgage to get some of your equity, although this could be harder depending on your financial circumstances and the economy in general.
So if you net worth is 1 million counting your home and 500,000 not counting it how does counting it help your meet your monthly expenses?
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.
Yes, having a place to live and have the security knowing it's yours is priceless.
Just some thoughts on the "investing basic" course you're taking. I would never argue against anyone learning and it's all good, but just be warned of its context (since I don't know the course content).
1. There's no better learning than just do it. Dip your toes in the water. Start small. When I got back into stock, I only buy DIA (Dow Jones index fund) but still got caught in Mar'20 correction. It took 7 months to recover.
2. The difficult part is not on when to buy, but on when to sell. Especially when you're losing money, it's emotionally difficult to sell (if I sell, I will loss money, but if I hold onto it, it may come back up). Back in the late '90s, I watched my $100/share stocks drop all the way down to less than $1. It was a painful lesson. I personally do not believe in "holding it for the long term", but have learned to "cut your losses" to preserve your capital.
Likewise, when a stock keep going up, learn when to take profit and sell. Again, it's emotionally difficult (why would I sell when the price keep going up?). Earlier, I bought an IPO stock, RIVIAN, at $99 and watched it goes all the way up to $180. I was in heaven! But only to watch it drop. Now it's at $86.
3. Start with index funds that buys the "market". Even the best brains on Wall Street are not able to beat the market so for the rest of us picking on individual stocks trying to beat the market is just a fantasy. I would suggest ETF funds such as "SPY" (S&P 500 index fund), or if you like dividend stocks, pick "DIA" (Dow Jones top 30 stocks), or if you like growth stocks, pick "QQQ" (Nasdaq 100 stocks - *not recommended* now because of the rising interest rate will drive down growth stocks).
Before I retired each home we lived in was an apartment building that paid us. Above the normal monthly bills [mortgage interest, taxes, insurance, sewage, etc. We also made a monthly principal-only payment to build equity a little faster.
Those homes I looked at as a part of my Net Worth.
I have never owned a Single-Family-Residence that had a mortgage on it. If you own real estate like that, who is paying you to own it?
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