Net Worth private poll

[CascadeClone]

Biggest trap people fall into on financial statements is including their house value. You most likely aren’t selling it and renting an apartment, and if you move you will sell and rebuy. Don’t include your house and it will give you a truer picture.

I instinctively wanted to disagree with this, BUT it got me thinking. If you include it, you should probably include a liability of where you would move to.

So if you have a $500k house with no mortgage, you can sell it and move to a $200k condo. So list plus $500k and minus $200k.

 

[BCClone]

I instinctively wanted to disagree with this, BUT it got me thinking. If you include it, you should probably include a liability of where you would move to.

So if you have a $500k house with no mortgage, you can sell it and move to a $200k condo. So list plus $500k and minus $200k.

That’s always an option, but how many people move down drastically?

 

[KnappShack]

When you do the interest spread also factor what you are investing in and how it affects taxes. If you are in a money market add the top tax brackets you are in to the rate needed. If you are going long term gains and not taking interest payments, then factor that amount into the gain rate you would need.

If you have a 3% mortgage rate, you are basically breaking even with a 4% MMA.

I should factor in the schedule A deduction too

 

[KennyPratt42]

We are no where near $2 million in net worth if the house is not included. The way we structured our IPERS pensions will allow the surviving spouse to continue to draw the current monthly amount until both of us are gone. So no drop in monthly payment when one of us passes. We lose a little each month over the #1 plan where you maxed it out, but this way the surviving spouse will not have to worry about that part of our 3 prong approach. Our current monthly payouts are $2800 SS, $4000 from IPERS and $4000 from investments, all post tax numbers. The only one of those that should change is the SS number will drop when one of us passes.

Its semantics, but your IPERS has value. If its paying out $4k/mo as long as you or your spouse is living its not really accurate to say it has a low value when you calculate your net worth. I'm assuming your investments are worth about $1.2m to generate $4k/mo and I would argue your IPERS is 'worth' at least a few hundred thousand based on expected payouts alone My back of napkin math if you both are in your 60s would be about $580k ($4k/mo for 15 years brough back to present value with a 3% inflation factor). From a retirement and retirement income perspective I would argue you effectively got close to that $2m advice. From an estate plan for non-spouse perspective saying its well below $2m is fair because you can't pass on that pension to kid/an organization/etc.

 

[CyWantsAWin]

Thanks to my parents, I was extremely lucky to leave college without debt. This played a huge part in my ability to build wealth that not everyone has the same opportunity. We spend less on ourselves today so we can do the same for our children.

Excluding our home, I have been debt free my entire life. Our 15 year mortgage on a modest home will be paid of in the next few years, even though we could write a check today for the balance. Looking back, we should have bought more house and taken on a bigger mortgage when rates were low, but that low payment gave us great flexibility.

Have always paid cash for cars and drove them as long as we could. I find that when I pay cash, it keeps me from buying an overly expensive vehicle. Large car payments are most people's biggest hurdle to wealth building.

Being debt free allowed me to invest a large portion of my income which continued into marriage. After 20 years, I now have trouble comprehending what our investments have grown to on a mostly middle class income. We are in our early 40s and our investment income exceeds our salaries.

If you want to build wealth; live below your means, stay out of debt, invest aggressively, and get a little lucky with the market.

It's very simple, but not easy.

 

[twincyties]

If looking at the pure numbers, absolutely that generally ends up being a good play.

On the other hand the rebuttal is, "why didn't anyone cash-out the house they have paid off to invest it in the market in 2020-2021 if it's such a no brainer?" The answer is because the peace of mind and $0 risk is worth more to most than the potential additional earnings in the market.

That's a totally fair point.

There is being in a hurry to pay it off (which many times doesn't make sense) and then there is cashing-out your equity and using too much leverage to engage in other investments (including more real estate). The latter can be very risky if you don't totally know what you're doing

My point is simply that taking advantage of a 30 year fixed rate that is tax deductible is generally not something people should be in a hurry to pay off just for the emotional relief of being "debt free". If you only look at it as debt you're potentially missing the opportunity to use the loans as a tool to grow your wealth.

 

[BCClone]

I should factor in the schedule A deduction too

Factor in whatever is appropriate and applicable. You can’t just say my mortgage is 3% so anything over that and I’m making money.

 

[VeloClone]

We are no where near $2 million in net worth if the house is not included. The way we structured our IPERS pensions will allow the surviving spouse to continue to draw the current monthly amount until both of us are gone. So no drop in monthly payment when one of us passes. We lose a little each month over the #1 plan where you maxed it out, but this way the surviving spouse will not have to worry about that part of our 3 prong approach. Our current monthly payouts are $2800 SS, $4000 from IPERS and $4000 from investments, all post tax numbers. The only one of those that should change is the SS number will drop when one of us passes.

Getting closer to retirement and still trying to decide if it makes more sense to go to the 100% survivor benefit for my spouse or the 75% benefit. Wasn't really thinking about SS changing when I go, but I am not really factoring in SS to begin with since I am not confident that it - as a program - will outlive me.

 

[BCClone]

That's a totally fair point.

There is being in a hurry to pay it off (which many times doesn't make sense) and then there is cashing-out your equity and using too much leverage to engage in other investments (including more real estate). The latter can be very risky if you don't totally know what you're doing

My point is simply that taking advantage of a 30 year fixed rate that is tax deductible is generally not something people should be in a hurry to pay off just for the emotional relief of being "debt free". If you only look at it as debt you're potentially missing the opportunity to use the loans as a tool to grow your wealth.

Thing now is that very few people itemize so mortgage interest rarely becomes tax deductible.

 

[1SEIACLONE]

Its semantics, but your IPERS has value. If its paying out $4k/mo as long as you or your spouse is living its not really accurate to say it has a low value when you calculate your net worth. I'm assuming your investments are worth about $1.2m to generate $4k/mo and I would argue your IPERS is 'worth' at least a few hundred thousand based on expected payouts alone. From a retirement and retirement income perspective I would argue you effectively got close to that $2m advice. From an estate plan for non-spouse perspective saying its well below $2m is fair because you can't pass on that pension to kid/an organization/etc.

Sure it's semantics, but there is no guarantee that both us will live another 20 years to draw out any set amount. I look at finances not as a whole, but what we can collect each month, without having to bring down the principal on our investments. It's impossible to put out an accurate figure of the net worth of SS or a pension like IPERS, because you cannot factor in how long you are both going to live.

 

[BCClone]

Getting closer to retirement and still trying to decide if it makes more sense to go to the 100% survivor benefit for my spouse or the 75% benefit. Wasn't really thinking about SS changing when I go, but I am not really factoring in SS to begin with since I am not confident that it - as a program - will outlive me.

Understanding your pension is huge. I was going through retirement stuff and ran numbers on my wife. She has IPERS and they only cash you out with what your portion was paid in. So roughly 6% of wages. If I could do it over again. This is what I would suggest.

She figures she will teach until about 60. So with hindsight, I would have had her cash out at age 40 and then rebuild. Invest the cash out (she would forfeit the 9% match up to that point) in growth. With a 9% growth (going somewhat conservative) her IPERS plus a 4% draw on the investment would be nearly equal to if she left everything in IPERS. She would also have just shy of 400k in her IRA.

 

[1SEIACLONE]

Getting closer to retirement and still trying to decide if it makes more sense to go to the 100% survivor benefit for my spouse or the 75% benefit. Wasn't really thinking about SS changing when I go, but I am not really factoring in SS to begin with since I am not confident that it - as a program - will outlive me.

They have been saying SS would not be there for you our entire lives, and guess what, it's still there. The program is too large and too many people depend on it for the government to allow it to fail. Take the cap off and index those that at top would go a long way to solving the problem.
The people at IPERS were really great to work with, so you need to sit down with them about a year before you retire and go through all the plans they offer and see what you are the most comfortable with. I know a couple of couples that did max out their return and then covered the difference if one of them dies by taking out a whole life policy that would make up a large portion of the difference when one of them passes. Again it comes to health and the numbers, we decided to make it easier for the surviving spouse and not mess with it, so we are giving up dollars today, for peace of mind for the remaining spouse down the road.

 

[CascadeClone]

Perhaps my most proud achievement is doing it all on one income. Not going to lie, as it wasn’t easy and we had to say “no” a lot, but doing so has provided us with the opportunity to now say “yes” to some of our wants.

Being "wealthy" is mostly about saying NO to some things that enable you to say YES to things that you really care about.

 

[CascadeClone]

That’s always an option, but how many people move down drastically?

My folks are already planning for selling their place and moving to somewhere smaller on 1-level. I know others that have done the same after retirement or the kids are gone.

 

[VeloClone]

Understanding your pension is huge. I was going through retirement stuff and ran numbers on my wife. She has IPERS and they only cash you out with what your portion was paid in. So roughly 6% of wages. If I could do it over again. This is what I would suggest.

She figures she will teach until about 60. So with hindsight, I would have had her cash out at age 40 and then rebuild. Invest the cash out (she would forfeit the 9% match up to that point) in growth. With a 9% growth (going somewhat conservative) her IPERS plus a 4% draw on the investment would be nearly equal to if she left everything in IPERS. She would also have just shy of 400k in her IRA.

My pension has the employer paying in about 54% and the employee 46% so I am better off having the employer's money working for me along with my money rather than just trying to invest my 46%. Also with the longevity in both of our families the peace of mind that we will never outlive that centerpiece to our retirement is big. Finally - and the biggest reason it wasn't for me - I would have to separate employment before the payout becomes available.

 

[CascadeClone]

Thing now is that very few people itemize so mortgage interest rarely becomes tax deductible.

Only people with jumbos paying 5-figures of interest annually.

I'm no pinko commie, but deducting mortgage interest is a sop to the wealthy that should be canned.

 

[VeloClone]

They have been saying SS would not be there for you our entire lives, and guess what, it's still there. The program is too large and too many people depend on it for the government to allow it to fail. Take the cap off and index those that at top would go a long way to solving the problem.
The people at IPERS were really great to work with, so you need to sit down with them about a year before you retire and go through all the plans they offer and see what you are the most comfortable with. I know a couple of couples that did max out their return and then covered the difference if one of them dies by taking out a whole life policy that would make up a large portion of the difference when one of them passes. Again it comes to health and the numbers, we decided to make it easier for the surviving spouse and not mess with it, so we are giving up dollars today, for peace of mind for the remaining spouse down the road.

All good advice. I figure if I'm not counting on SS in my calculations I should be fine if we collect it our entire lives.

I will not be talking to IPERS, though, since I am not in IPERS.

If I lose my wife before I retire (God forbid) I can declare my son who has special needs as my survivor and make sure he gets something, even if it is just 25% for as long as he lives.

 

[VeloClone]

Only people with jumbos paying 5-figures of interest annually.

I'm no pinko commie, but deducting mortgage interest is a sop to the wealthy that should be canned.

Yeah, if it can no longer reasonably be taken by the average homeowner, it should just go away.

 

[CycloneDaddy]

Dang I was poor in 2008.

 

[ClonesFTW]

They have been saying SS would not be there for you our entire lives, and guess what, it's still there.

We'll see if Gen Z starts to "get to gettin" here soon to help out with this.