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August 12, 2023 at 7:18 pm #86708USER
Family of 4 (34, 33, 8, 6). Net worth of 1.5MM with only 100k of that being in 401k/IRAs, the rest is home equity. If we plan to die in this house, it seems that we’re extremely low on retirement funds. Thoughts?August 12, 2023 at 7:19 pm #86709Gordon
Only in this group that having a 1.4mil house is ‘not doing well and not good enough’ wtf guys.
1.4 mil house at 33 and 34? You guys are killing it! now that you paid off the house, just dump all of your extra monthly earnings into an index fund.August 12, 2023 at 7:20 pm #86710Aaron
Yep, you are behind. But you have time to catch up. And based on the scenario provided you may be looking at retiring in your 50’s or 60’s at the earliest rather than doing FIRE.
good luck.August 12, 2023 at 7:22 pm #86712Scott
Yep. I generally don’t even include home equity when calculating net worth.August 12, 2023 at 7:23 pm #86713Lucas
As a real estate agent many home owners also think their house is worth more than it is. But yes, you need more cash to live in retirement.
I prefer rental properties where I get cash flow annually, but the stock market or other cash flowing assets are great too.August 12, 2023 at 7:23 pm #86714Jin
It almost sounds like you are “house poor” in that you may have overspent on your house and now don’t have enough each month to invest/spend on other things?August 12, 2023 at 7:23 pm #86715Christopher
Agreed. But it seems like you have time to correct that situation.August 12, 2023 at 7:24 pm #86716Tamara
My home will serve as an annuity when I retire, as I plan to draw on the equity through a reverse mortgage. That being said, I don’t live in a high cost of living area. If my house was worth $1.5m, I’d downsize first.
I figure by 62, I’ll be eligible to draw $1k/mo from the house until I’m gone. So yes, the home can be considered as an asset.
I’m not one of those people who can sell everything and travel homeless. Property taxes are reasonable where I live.
Renting isn’t an option.
Explore these too: How does one calculate what their monthly needs will be in retirement?August 12, 2023 at 7:24 pm #86717Janelle
Why aren’t you investing? Take advantage of the fact that you have 30 years left and start pumping money into 401Ks or similar.August 12, 2023 at 7:25 pm #86718Ryan
Home equity is absolutely part of your net worth but it shouldn’t be used when you’re calculating your FI / retirement number since it’s not liquid and that’s what you need in retirement: liquidity. Yes, you’re behind but the good news is that you won’t need as much money built up to sustain your life in retirement since you’ll have a paid off house. Personally, we rent and will always rent, so we needed to build up a larger nest egg before we retired last year.
If I were you, I’d stop paying any extra on your mortgage (if you are) unless the interest rate on it is extremely high and start investing hard. Get at least the full match on your 401k since that’s a 100% ROI, then max out your yearly Roth IRA contributions and then go back and put as much in the 401k as possible.
If you think you might have a shot at retiring before 59.5 then you might defer some of that extra 401k contribution to a brokerage so it can sustain you until then.
Good luck!August 12, 2023 at 7:26 pm #86719Grant
You’re 34 with 100k. If you retired at 60, that’s 26 years. That’s nearly 3.5 times to double based on the s+p average. That’s about a million just off what you already have, assuming it’s invested well and you don’t get into some bind heavy mix. You’re gonna keep adding to that too I’m sure.
My point is that define “low” or “enough”. Also we don’t know your target age and withdraw rate.
If your planning to go in your 40s, no, it’s probably not enough. At 60 with your continued contributions, it very well may be.
Don’t forget to take a look at: Recommended calculator to see how much money you need in retirement?August 12, 2023 at 7:26 pm #86720Lioba
What’s your annual household income and what is your annual spending?
Now that you don’t have a house payment you can invest heavily in retirement. And if you’re concerned sell and buy a $700 house and invest the rest.
Do you really need a 1.4 million house? Seems excessive, but if you really want it that’s also fine, you just have to keep grinding since depending on your spending habits you might need a lot for retirement.
If you feel you need your 1.4 million dollar house now, do you think you will need/want it when you are retired and it’s only you two left and your kids have moved out?August 12, 2023 at 7:27 pm #86721Laura
Your thoughts are accurate. You could in theory do a reverse mortgage in later years to harvest some of the equity for retirement, or take out a HELOC and invest it now. Both of these are usually believed to be terrible ideas, but if you’re truly committed to not moving ever, and divorce will never happen and a need for nursing care will never happen…then these are choices you could consider that are still bad choices.
All eggs in one basket is gambling. You’re gambling.August 12, 2023 at 7:30 pm #86723Lioba
How much is the home worth and how much is the mortgage left on it? Seems odd that you would have accumulated so much equity so quickly.
Yes, you’re very low on funds. Did you pour money into paying off the mortgage? Some people in your situation would eventually downsize, sell the house get something cheaper or rent if that was the difference between retiring or staying working.