Thank you @doschicos and @ucbalumnus for the summary tables. I’m hoping some of those in the lower tiers are civil servants who will have pensions to help them get by.
Yes, government employees are more likely to have defined-benefit pension plans than private sector employees. In the private sector, defined-benefit pensions have been declining. However, both government and private sector pension plans are commonly underfunded.
Although for most who post here, it can be fun to compare oneself to the charts, the accompanying article is an interesting read; for example, how wealth was measured & ways of looking at differences, such as race.
For the youngest age group(s), I imagine a chunk of the difference between being above or below the 50th percentile is either or both student loans & mortgage debt.
@ManhattanBoro , I could not access that article. It demanded I pay to subscribe. This was on my phone.
I don’t think mortgage loans would factor in much because they would be offset by the asset of the real estate holding. Student loans would definitely have an impact, though.
@doschicos - definitely student loan debt has an impact … I was thinking mortgage debt would lower the equity value … and, mortgage payments could take a large chunk of a paycheck
@Nrdsb4 - on my laptop, I can access the entire piece without logging into my NYT account.
But this piece is about assets not income. It’s not like rent is cheap many places, either.
These days at least, lenders aren’t in the practice of giving out more money than a home is worth.
Our equity in our house is less than 10% of our net worth, but it definitely figures into our retirement plans. It’s too much house for the two of us, and the overhead on this place is pretty substantial. So we plan to sell in the next 3 to 5 years and downsize. What we net from selling should allow us to move into a nice place mortgage-free, while significantly reducing our monthly expenses, as well as freeing up some of the time and energy that goes into maintaining this place.
I can understand why some people say they “don’t count” their home in their retirement plans., but I think they only mean they don’t count its fair market value when adding up how much they’ll have available to spend. They nonetheless are counting on it to provide an essential service—housing—that otherwise they’d need to pay for elsewhere. To that extent it is part of their retirement plan, and an important part. An economist might add that they’re placing a subjective value on their home that exceeds its fair market value. That makes it, to them, an especially valuable asset, the value of which isn’t entirely measurable in dollars.
For us, figuring out whether we had “enough” was determined by roughly calculating our income and expenses pre and post retirement. The net worth was the cushion for worst case scenarios — an asset that could be sold or rented out or have rooms rented out if things turned out worse than expected.
Everything else for us is just noise. If we couldn’t live on our projected stream of income, we would have to figure out how to reduce expenses or increase income or both.
Some folks choose to move to a lower cost of living place, take on part time jobs, work longer, get real estate or an annuity with regular payouts, and cut costs in various ways.
I’m looking at a knee replacement, and am about to face accessibility square in the face. No bathrooms or bedroom without having to tackle stairs. This will be a temporary issue for the knee replacement, but a non-trivial one down the road. Would have to build an addition to the house to carve out space for a bedroom and bath on the main level, as that area is now ~600 sq ft. and includes kitchen, dining room and living room. That is probably overbuilding for our neighborhood.
If we moved down nearer to my family, we could bank a decent chunk of the proceeds from our house here, but that isn’t happening. DH would like to rent and not have to spend $$/time/energy on maintenance, but rent in this area is 2.5x our mortgage payment, which far exceeds what we spend on taxes and such.
There are still a few people in our subdivision who are original owners. They are now in their 90s and still live at home, generally aided by adult children living nearby and health aides. I can’t imagine DH staying in this house if I go first.
My home value is a huge chunk of my ‘net worth’ at close to 60%. However, I am not including it in my analysis of income needed versus expenses in retirement. I’m lucky that I will have a good combination of guaranteed monthly income when I reach 70 that offsets having to use up all the retirement savings (unless Social Security completely goes bankrupt). I have decided the house is going to be my long term care safety net and I am not going to purchase LTC insurance. Either it gets rented out to cover Assisted Living or Memory Care or gets sold. For that reason, I will not be able to live in place with paid caretakers because I will be sitting in the long term care asset. Which is too bad because I just renovated it to be able to age in place, including a great caretaker attached apartment. It’s a nice single level house with a roll-in shower now.
Oh well.
I can always sell it and pocket a big chunk of equity and move to a smaller place to set up for home care. I’m lucky because I live in a Community Property state and I was able to do ‘Stepped Up’ Value last year when my H died. That significantly lowered the capital gains I am going to have to pay on the sale of my house. At first I didn’t know anything about Stepped Up Value and I was panicking because I had to sell my house in 2 years because I was going to lose the $500,000 versus $250,000 exemption from capital gains. That equates to $35,000 and it was gnawing at me when I was procrastinating about what to do. By sheer coincidence I had a bank appraisal of the house within 6 months of the death. Did not realize I did the appraisal in the nick of time until I learned about the Stepped Up Value later. That really helped with the final decision to stay in the house.
I could always pull a Reverse Mortgage to pay for in home care. I don’t really care about preserving 30% of the equity for my D’s inheritance. She can have whatever is left over except for the fact that she will have to pay off the loan within 6 months of my death if she wants to keep the house (which she thinks she does right now but that could change next week!!).
@ManhattanBoro - the NYT article has had its own thread for days http://talk.collegeconfidential.com/parent-cafe/2152199-new-york-times-quiz-are-you-rich.html
@jym626 - I think the article that thread focuses on is one on income. @ManhattanBoro linked to a different, later article (perhaps part of the same series??) on net worth/wealth.
@bclintonk - you wrote what I was driving at much more clearly than I was able to convey. Thank you!
My line of thinking only applies if you can buy something else that is workable that is less expensive. Clearly doesn’t work for those with huge amounts of appreciation who want to remain in the same area. But, if one has a paid off house worth $800,000 and sells it and can find something that works for $300,000, that nets an additional $500,000 that can be invested and will increases one’s income stream. Not to mention cost savings on expenses related to a (assumingly) smaller place.
We’ve done our downsize, but we moved to a location (a beach) where housing costs are much higher per sq ft. than where we lived before. We did spend less than we got out of last home, but we got significantly less space because - beach. In the next 3-4 years, I’d like to upsize a tad, but I wondered just how much of our total should be allocated to our primary residence should we ever do that.
I have seen a rule of thumb of 30%, but that is more than I would ever allocate at this point in our lives.
Ah, @Hoggirl - it looked like the same article.
Interesting that the 55-64 are wealthier, %ile wise, than the 65+
@jym626 - my assumption is that is because as people age they have to start spending down their principle. Especially since there is no upper age limit on that last category.
At the 80th percentile wealth and up, the 65+ are probably spending or giving away their money while in retirement.
However, at the 75th percentile and below, the wealth increases for the 65+ versus the 55-64 for the same percentile. But that may be due to poor people tending to die earlier for various reasons relating to lack of money (cannot afford medical care, etc.).
Or the 65+ group was hit with a recession in their prime middle “accumulating” age, wind taken out of their sails. How do I know this?
My home is 14% of my net worth.
The NYT article on net worth is later in the same series as the one about where you stand on the income distribution. Interestingly, while the income questionnaire differentiates between the same income if you earned it in Flint MI versus Manhattan.
However, it doesn’t appear the net worth comparisons do that. $1 MM or $3 MM or $10 MM ia a lot different if you live in Flint versus Manhattan,
Not sure why the 55-64s have more assets at least for part of the distribution. I just turned 65. Not clear whether I am more like the younger group or the older group.
I haven’t read every post in this thread, but did read recent ones. (I also am in the “don’t count value of home” camp when calculating retirement savings BTW). That said: does anyone else feel paralyzed at the thought of downsizing? We have lived in our home for 15 years. It’s a relatively large home on a couple of acres and the cost of the upkeep is substantial. We also basically live in the kitchen, family room, and bedroom - that’s it; most of the other rooms are unused. Kids were out and on their own, but youngest just boomerang-ed back, though I believe he won’t be here for long. I hate the idea of moving, as it’s the best place I’ve ever lived, but I don’t relish the idea of continuing to pour money into this home. Moving would free up funds to travel, something we both love to do. I know it’s the right thing to do but I am so conflicted! Not to mention freaked out at the idea of dealing with all the accumulated “stuff”! LOL Anyone else happy (or sorry) that they made this kind of move?
We downsized in 2016. We have not regretted it for one minute! I don’t miss anything I gave or threw away. We still need to go through the family picture albums more carefully, but so happy we have less stuff.