For the 4% rule do you only count stock investments or your home too?

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  • #95781 Reply

      Hey folks! I’m curious about the 4% rule: when planning for retirement, should I only consider my stock investments or include the value of my home as well? I want to ensure I’m making the most accurate calculations possible. Appreciate any insights or advice you can share on this topic!

      #95782 Reply

        It’s investable assets only. Now with that said, if your home is paid off that will reduce your annual living expenses, which means your FIRE number becomes significantly less.

        #95783 Reply

          The 4% rule is a withdrawal strategy. A home is an asset you live in, ideally have paid off, and don’t draw an income from. I don’t understand the question.

          #95784 Reply

            No not the home, think about it, how are you going to sell 4% of your house to create annual income.

            #95785 Reply

              The 4% rule is based on assets that can easily be liquidated…not networth…which is really the only thing you can count the equity in your home towards and otherwise useless number.

              #95786 Reply

                One can downsize and use a portion of the equity or use it all in payment for LTC (Long Term Care).

                Personally, I would not include my home while computing the 4% of portfolio.

                Related: Question about 4% rule: I’ve noticed that banks are now offering 4% in savings?

                #95787 Reply
                Ro Wag

                  How would your home have any relevance to the 4% rule? Unless you’re selling it.

                  #95788 Reply

                    I’m counting a portion of mine because I’m going to sell and downsize when I retire and tap about $250k of that equity which will all go into a brokerage account after restoring my cash bucket if needed.

                    #95789 Reply

                      Only count your home value if you plan on liquidating your home at retirement. Some people do this for the purpose of downsizing, but then you need to factor cost of your new dwelling to determine if your 4% will cover that and all other living expenses.

                      #95790 Reply

                        Why have a 4% rule when you can sell calls on your positions and collect premium for income?

                        You still keep your principal and can drastically reduce any withdrawal needs.

                        #95791 Reply

                          If you plan to liquidate your home as part of the portfolio, you could count it, but we plan on living in our home until the end, so we don’t count it. (However, not just stock investments – total monetary portfolio: stocks, bonds, cash, alternative investments).

                          #95792 Reply

                            The 4% rule is a general guideline for determining how much you can safely withdraw from your investments each year in retirement. It’s based on the idea that if you withdraw 4% of your investment portfolio each year, your money should last for at least 30 years.

                            When calculating the 4% rule, you should only count your stock investments, not your home. Your home is a separate asset that can provide you with a place to live, but it’s not a liquid investment that you can easily sell or withdraw from.

                            So, if you have a $1 million investment portfolio and you want to follow the 4% rule, you would withdraw $40,000 per year. But if you also own a $500,000 home, you wouldn’t count that towards your 4% withdrawal amount.

                            Proposed: How do you maintain motivation after reaching $100k in investments, excluding property?

                            #95793 Reply

                              Investments only.

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