What's your actual/planned SWR?

[whiskeyjack]

I called us an 'actual 4%' but we are less than 1 month post-FIRE and it remains to be seen if my planned budget will carry us.  There's also the complication that we plan to support kids through college and I'm not sure how much of our stash I should be holding out of the calculation as college funding.  But 4% is in the ballpark.

[GrumpyPenguin]

I voted 2-3%, because that's what my withdrawal rate would likely be in my first year... but I realized after voting that this survey asked for "SWR" and not simply your "WR". I'm not sure if you guys treat this differently here on the forum, but I would say that I believe 4% is the "safe withdrawal rate," but I simply don't need or care to live off of that much right now (or whenever I actually RE), so I'll likely have an actual withdrawal rate of 2-3%.

Yes, this means I'm probably working "too long." 

At least knowing that in all likelihood the stash is going to increase substantially over RE is a nice feeling.

[arebelspy]

I want to pull the plug on work with a 5% SWR ($40k withdrawals on $800k savings).

I feel safe doing it though, because we only really need to make it 20 years before a combination of FERS retirement and Social Security cut that $40k in half

What's a cFIREsim run say on that scenario?

[secondcor521]

My spreadsheet says 3.42% today, but that is with Friday's closing prices.  I use trailing 6 month moving average expenses; that plus the stock market variations means it bounces around a little.  Have a little bit left to get my Roth pipeline where it needs to be; should be there in the next few months.

FIRE'd in February and am now at 3.06%.

[mathjak107]

for some reason in poll after poll most retirees who are living off their portfolio's seem to naturally fall out in the 3% arena early on . .

i know we set goal posts of 4% as a first year but we also naturally fell out around 3.50% .

perhaps it is just a kind of comfort range .

[Shane]

Voted "4% actual" in the poll, because that's what our WR is right now, but we're only in our 3rd month of actual FIRE.

This month is the first month we've closely tracked actual spending, and it looks like we're going to end up almost exactly at 4%, maybe a little bit under, for July.

In ~2.5 years my DW & DD will start collecting SS benefits, which will be equal to ~2% of our current NW. That means we will then be able to either increase spending by 50% or decrease withdrawals from our portfolio to dividends only, i.e., 2%. In 12 years, I will also become eligible to start collecting SS benefits, which will then mean we can, again, either increase spending or decrease the amount we are withdrawing from our portfolio, depending on how the markets are doing.

Our main plan is to have an extremely flexible WR, probably somewhere between 2-10%.

[SwordGuy]

I put a planned rate of <2% not because I'm crazy conservative about this (though I am somewhat conservative...)

A number of income streams kick in next year that should keep us from needing to pull out much (if any) of our stock investments.  The only amount we're intending to pull out are required minimum distributions from my wife's 401k and the ira I inherited from my mom - and that's only because we have to.   

I'm hoping to use those to fund a rental property every other year.

[mathjak107]

you have to wonder if those who's actual fell out above 3% but less then 4% voted  3% or 4%  for the actual .    i voted 3% even though it was 3.50% since it was less then 4% . but many may have gone 4% .

you usually do not see more  4% actual ,   most of the time the 3% ranges are the more popular actual   . most of the time actual is less then 4 but more then 3 .

the other thing is it can change once ss kicks in . we drop from 3.50% to the  2% range  once our delayed ss kicks in . so voting really is not accurate for us .

[RetirementInvestingToday]

I became FI just this week.  It took me just shy of 9 years to hit my magic Number.

After paying cash for a home I'm planning on a withdrawal rate of <=2.5%.

[Exflyboy]

you have to wonder if those who's actual fell out above 3% but less then 4% voted  3% or 4%  for the actual .    i voted 3% even though it was 3.50% since it was less then 4% . but many may have gone 4% .

you usually do not see more  4% actual ,   most of the time the 3% ranges are the more popular actual   . most of the time actual is less then 4 but more then 3 .

the other thing is it can change once ss kicks in . we drop from 3.50% to the  2% range  once our delayed ss kicks in . so voting really is not accurate for us .

Same with delayed pensions of course.

[ender]

My point is: removing actual valid data is (to me) a worse sin than being conservative and padding the data to support it.  (I went overboard on the "being conservative" as a lame attempt to prove a point.)  Bad stuff happens.  It's not the norm.  But don't ignore it.

Keep in mind that nearly all simulated failures are pretty obvious in the early years of FIRE they are happening.

The greater sin of ER than fudging data like this (either to make it more risky or less) is setting a plan and being 100% inflexible in adjusting it.

[Spork]

My point is: removing actual valid data is (to me) a worse sin than being conservative and padding the data to support it.  (I went overboard on the "being conservative" as a lame attempt to prove a point.)  Bad stuff happens.  It's not the norm.  But don't ignore it.

Keep in mind that nearly all simulated failures are pretty obvious in the early years of FIRE they are happening.

The greater sin of ER than fudging data like this (either to make it more risky or less) is setting a plan and being 100% inflexible in adjusting it.

True enough.

The problem I have with removing data is.... there really isn't that much data to start with.  We have less than 100 years (about one person's lifetime) of data.  Deleting 4-5 years is a pretty significant action.  And if you're going to delete 4-5 oddball down years... you probably want to delete the top 4-5 years as well. 

I don't mean to sound negative.  I don't actually feel that way.  Compare it to a big flood.  It's hard to know if it's a 10-year flood, a 50-year flood or a 100-year flood.... until you have data from hundreds of years to average it out.

[Classical_Liberal]

True enough.

The problem I have with removing data is.... there really isn't that much data to start with.  We have less than 100 years (about one person's lifetime) of data.  Deleting 4-5 years is a pretty significant action.  And if you're going to delete 4-5 oddball down years... you probably want to delete the top 4-5 years as well. 

I don't mean to sound negative.  I don't actually feel that way.  Compare it to a big flood.  It's hard to know if it's a 10-year flood, a 50-year flood or a 100-year flood.... until you have data from hundreds of years to average it out.

Even if its a 10 year flood, there is only a 10 percent chance of it happening in a given year. To enders point, not only is it a small chance in a given year, but it's easy to foresee the flood coming well in advance.   Do you spend months every year sandbagging "just in case", or is it a wiser allocation of resources to be mentally & physically prepared to sandbag if and when its actually a flood year. Either option protects just as effectively, but in the former resources are used unnecessarily 90 percent of the time.

[Spork]

True enough.

The problem I have with removing data is.... there really isn't that much data to start with.  We have less than 100 years (about one person's lifetime) of data.  Deleting 4-5 years is a pretty significant action.  And if you're going to delete 4-5 oddball down years... you probably want to delete the top 4-5 years as well. 

I don't mean to sound negative.  I don't actually feel that way.  Compare it to a big flood.  It's hard to know if it's a 10-year flood, a 50-year flood or a 100-year flood.... until you have data from hundreds of years to average it out.

Even if its a 10 year flood, there is only a 10 percent chance of it happening in a given year. To enders point, not only is it a small chance in a given year, but it's easy to foresee the flood coming well in advance.   Do you spend months every year sandbagging "just in case", or is it a wiser allocation of resources to be mentally & physically prepared to sandbag if and when its actually a flood year. Either option protects just as effectively, but in the former resources are used unnecessarily 90 percent of the time.

To answer you question succinctly: I don't buy a house in a flood plain.

[arebelspy]

And if you're going to delete 4-5 oddball down years... you probably want to delete the top 4-5 years as well. 

...alright?  You'll still get in that same 5-6% range (whatever it is, I haven't run the numbers).  Because 6% is the worst times other than those 5.  Heck, you could remove the top 20 (and bottom 5) and it'd be the same.  Because it's not an average, but a "cover the worst."  So removing the top ones does nothing to it.

I get what you're saying about data, and if we had hundreds of years of valid data, that would be great. We don't. So you want to preserve every bit you can.  And I'm saying we can also look at it rationally.

If we had one data bit in the late 1800s that showed a SWR of 1%, and the rest is literally the same as now, would you save up for 1%?  Or would you say "well, I don't think I'm going to retire into literally the worst year ever, so probably the 4% that covers 99% of all other scenarios is good"?  I'd do the latter.  And that's my point with this, is to say "Today's environment going forward looks bleh.  High valuations, low interest rates.  I think it'll probably be worse than average.  But I DON'T think it'll be one of the worst 5 years EVER.  So I probably don't need to cover that scenario (with a 4% WR), and can go for the 5% WR that covers 90% (whatever) of other scenarios."

Sure, throw out the top half of the data if you think it'll be worse going forward.  But it won't change your SWR, since it's based on covering a worst-case, not an average.

[arebelspy]

True enough.

The problem I have with removing data is.... there really isn't that much data to start with.  We have less than 100 years (about one person's lifetime) of data.  Deleting 4-5 years is a pretty significant action.  And if you're going to delete 4-5 oddball down years... you probably want to delete the top 4-5 years as well. 

I don't mean to sound negative.  I don't actually feel that way.  Compare it to a big flood.  It's hard to know if it's a 10-year flood, a 50-year flood or a 100-year flood.... until you have data from hundreds of years to average it out.

Even if its a 10 year flood, there is only a 10 percent chance of it happening in a given year. To enders point, not only is it a small chance in a given year, but it's easy to foresee the flood coming well in advance.   Do you spend months every year sandbagging "just in case", or is it a wiser allocation of resources to be mentally & physically prepared to sandbag if and when its actually a flood year. Either option protects just as effectively, but in the former resources are used unnecessarily 90 percent of the time.

To answer you question succinctly: I don't buy a house in a flood plain.

No equities at all?

[mathjak107]

And if you're going to delete 4-5 oddball down years... you probably want to delete the top 4-5 years as well. 

...alright?  You'll still get in that same 5-6% range (whatever it is, I haven't run the numbers).  Because 6% is the worst times other than those 5.  Heck, you could remove the top 20 (and bottom 5) and it'd be the same.  Because it's not an average, but a "cover the worst."  So removing the top ones does nothing to it.

I get what you're saying about data, and if we had hundreds of years of valid data, that would be great. We don't. So you want to preserve every bit you can.  And I'm saying we can also look at it rationally.

If we had one data bit in the late 1800s that showed a SWR of 1%, and the rest is literally the same as now, would you save up for 1%?  Or would you say "well, I don't think I'm going to retire into literally the worst year ever, so probably the 4% that covers 99% of all other scenarios is good"?  I'd do the latter.  And that's my point with this, is to say "Today's environment going forward looks bleh.  High valuations, low interest rates.  I think it'll probably be worse than average.  But I DON'T think it'll be one of the worst 5 years EVER.  So I probably don't need to cover that scenario (with a 4% WR), and can go for the 5% WR that covers 90% (whatever) of other scenarios."

Sure, throw out the top half of the data if you think it'll be worse going forward.  But it won't change your SWR, since it's based on covering a worst-case, not an average.

yep , a safe withdrawal rate only looks at the worst cases . the best cases do not matter that much if in fact at all . a 100% success rate means all 5 or 6 worst case scenario's were passed .   a 90% excludes them but still goes up the line to the next worst cases .

[Spork]

True enough.

The problem I have with removing data is.... there really isn't that much data to start with.  We have less than 100 years (about one person's lifetime) of data.  Deleting 4-5 years is a pretty significant action.  And if you're going to delete 4-5 oddball down years... you probably want to delete the top 4-5 years as well. 

I don't mean to sound negative.  I don't actually feel that way.  Compare it to a big flood.  It's hard to know if it's a 10-year flood, a 50-year flood or a 100-year flood.... until you have data from hundreds of years to average it out.

Even if its a 10 year flood, there is only a 10 percent chance of it happening in a given year. To enders point, not only is it a small chance in a given year, but it's easy to foresee the flood coming well in advance.   Do you spend months every year sandbagging "just in case", or is it a wiser allocation of resources to be mentally & physically prepared to sandbag if and when its actually a flood year. Either option protects just as effectively, but in the former resources are used unnecessarily 90 percent of the time.

To answer you question succinctly: I don't buy a house in a flood plain.

No equities at all?

Lol.  I was being way too literal.  I won't buy in a flood plain.  Period.  But... historically I SAVED WAY TOO MUCH.  Let me state that again for the record.  I. Saved. Too. Much.  It is in my DNA.  It colors my responses.  You should ignore me when appropriate.

[Spork]

Sure, throw out the top half of the data if you think it'll be worse going forward.  But it won't change your SWR, since it's based on covering a worst-case, not an average.

I am really being Devil's advocate.  See the above response.  And I am really nerdy with being overly anal about ... anything.  Money especially.   

FWIW, I currently have about a 3% SWR with 100% success (I know, anything above 95 or so is statistically ridiculous).  This is without computing pending inheritance.  I expect it to hit 2%.  Dumb.  Yes.  I know.  Boulder of salt.

[LAL]

i'm a conservative voter, but i wondered have people here who retired gone above their budget?  After retirement and buying your own insurance have you retired for 20 years and gone from 35-55 and now the medical bills are a lot different? What happens if it blows the budget then?  Just my own curiousity.  I mean in theory medical insurance premiums would have gone up during that time. Do you just pull more from the stash or cut your living?  Same budget but what happens if you can't cut other stuff any cheaper?  More property taxes.  More repairs to the home, etc? I just ask if you were pulling a higher amount and using a very lean budget versus a very low SWR and fatty budget to start.

[arebelspy]

i'm a conservative voter, but i wondered have people here who retired gone above their budget?  After retirement and buying your own insurance have you retired for 20 years and gone from 35-55 and now the medical bills are a lot different? What happens if it blows the budget then?  Just my own curiousity.  I mean in theory medical insurance premiums would have gone up during that time. Do you just pull more from the stash or cut your living?  Same budget but what happens if you can't cut other stuff any cheaper?  More property taxes.  More repairs to the home, etc? I just ask if you were pulling a higher amount and using a very lean budget versus a very low SWR and fatty budget to start.

The early-retirement.org forums will have a lot more data for you on this; they skew older and more years ER'd than the average retiree here.

[Roland of Gilead]

If Trump wins, 3%

If Hillary wins, 4%

I have a lot of money in biotech :-)

[Reynold]

Keep in mind that nearly all simulated failures are pretty obvious in the early years of FIRE they are happening.

I voted 2-3% for planned, haven't FIRE'd yet so no actual.  I am more dubious about the 4% SWR in the sim calculations, because they look only at the historical U.S. market.  When Kitces looked at international markets, a LOT of them failed at 4%, and a disturbing number of developed markets failed even at 3%. 

http://retirementresearcher.com/the-shocking-international-experience-of-the-4-rule/

Japan is a prototypical example, and I don't know if in the first 5 years of their 20 year and counting "recession" it would have been obvious that you couldn't withdraw 4%.  They would have expected their market to bounce back, like ours always has.  Europe is following in their footsteps, with an aging population, low productivity growth, low GDP growth, a highly regulated economy, and trying to fix these problems by borrowing money.  I see these same trends in the U.S., so if we are in the first few years of a period that looks like the last few years in Europe and the last two decades in Japan, a 3% WR may be riskier than I'd like.  If I hated my job, I might take the chance, but it pays very well, and is pretty easy, and we've had high medical expenses in the last few years, so. . .

[ender]

Keep in mind that nearly all simulated failures are pretty obvious in the early years of FIRE they are happening.

I voted 2-3% for planned, haven't FIRE'd yet so no actual.  I am more dubious about the 4% SWR in the sim calculations, because they look only at the historical U.S. market.  When Kitces looked at international markets, a LOT of them failed at 4%, and a disturbing number of developed markets failed even at 3%. 

http://retirementresearcher.com/the-shocking-international-experience-of-the-4-rule/

Japan is a prototypical example, and I don't know if in the first 5 years of their 20 year and counting "recession" it would have been obvious that you couldn't withdraw 4%.  They would have expected their market to bounce back, like ours always has.  Europe is following in their footsteps, with an aging population, low productivity growth, low GDP growth, a highly regulated economy, and trying to fix these problems by borrowing money.  I see these same trends in the U.S., so if we are in the first few years of a period that looks like the last few years in Europe and the last two decades in Japan, a 3% WR may be riskier than I'd like.  If I hated my job, I might take the chance, but it pays very well, and is pretty easy, and we've had high medical expenses in the last few years, so. . .

I'm not sure of any FIRE strategy suggesting you hold 50% stocks 50% bonds/bills for only a single, relatively small country without any international exposure (which is what that article you link models).

That article leads me to be skeptical since the author basically says, "100% stocks have supported a higher withdrawal historically but I just decided to use 50/50 for my modeling for <oops forgot to say why actually just roll with me>."

[mathjak107]

i agree . just because you live in a country does not mean you had to invest just there

[Ursus Major]

Keep in mind that nearly all simulated failures are pretty obvious in the early years of FIRE they are happening.

I voted 2-3% for planned, haven't FIRE'd yet so no actual.  I am more dubious about the 4% SWR in the sim calculations, because they look only at the historical U.S. market.  When Kitces looked at international markets, a LOT of them failed at 4%, and a disturbing number of developed markets failed even at 3%. 

http://retirementresearcher.com/the-shocking-international-experience-of-the-4-rule/

Japan is a prototypical example, and I don't know if in the first 5 years of their 20 year and counting "recession" it would have been obvious that you couldn't withdraw 4%.  They would have expected their market to bounce back, like ours always has.  Europe is following in their footsteps, with an aging population, low productivity growth, low GDP growth, a highly regulated economy, and trying to fix these problems by borrowing money.  I see these same trends in the U.S., so if we are in the first few years of a period that looks like the last few years in Europe and the last two decades in Japan, a 3% WR may be riskier than I'd like.  If I hated my job, I might take the chance, but it pays very well, and is pretty easy, and we've had high medical expenses in the last few years, so. . .

I'm not sure of any FIRE strategy suggesting you hold 50% stocks 50% bonds/bills for only a single, relatively small country without any international exposure (which is what that article you link models).

That article leads me to be skeptical since the author basically says, "100% stocks have supported a higher withdrawal historically but I just decided to use 50/50 for my modeling for <oops forgot to say why actually just roll with me>."

For me the main concern with lower SWRs in other countries is the question of why has the SWR for the U.S. market been an exception to the upside and how likely is that to continue into the future? I'd love to get those questions answered.

[mathjak107]

the swr in the usa is highest because as bad as it has been here at times , it has been even worse longer elsewhere .

the 4%  swr is also not really that high here .  don't forget it is not based on any averages . it is based on the worst time frames we have had .  if we eliminated the 4 or 5 worst time frames , 1907,1929,1937,1965/1966 the swr would have been 6.50% .

basically our recovery's have been faster .

when it comes to a safe withdrawal rate it is not about average gains as much as it is about recovery's from the bad times . a steep v-shapped drop and recovery  like 2008 was not even a blip . but the extended poor conditions the y2k  retiree encountered  which are more u-shaped are far more painful .

the y2k retiree 15 years in is in the same condition the 1929 retiree was . they are  still passing but unlike 90% of all time frames where you ended 30 years with more than you started , they will have little left .

[ender]

For me the main concern with lower SWRs in other countries is the question of why has the SWR for the U.S. market been an exception to the upside and how likely is that to continue into the future? I'd love to get those questions answered.

I'm not sure anyone now recommends a purely 100% US stock portfolio without any international mixed in. I know our plan is a 70/30 split US/international.

But if you do want 100% domestic stocks, keep in mind that the USA/China both hold around the same portion of global GDP -- Japan is about 1/4 of either and appears to be higher than all other countries than India (which is about 1/3 the USA/China GDP). And China's number is hard to guesstimate since they do weird currency games.

There is no guarantee that the USA market will remain this large of a percentage of the world economy (~16% I guess according to this source) but for many decades now the USA has been the economic powerhouse of the world. As China/India continue developing, this will likely decrease somewhat.

Regardless, some perspective: the USA's GDP as a single country is more or less what the entire European Union's GDP totals. In some sense, choosing to hold all your stocks in an EU country domestic stocks/bonds/currency is akin to having all your retirement portfolio in a single state in the USA.

[fattest_foot]

I want to pull the plug on work with a 5% SWR ($40k withdrawals on $800k savings).

I feel safe doing it though, because we only really need to make it 20 years before a combination of FERS retirement and Social Security cut that $40k in half

What's a cFIREsim run say on that scenario?

Sorry, I hadn't checked this thread in a couple weeks.

I used kind of "worst case" scnearios with 75% Social Security, and no raises for the next 7.5 years of work. I used an 80/10/10 equities/bonds/cash split.

It came out with a 100% success rate. Worst scenario was an ending portfolio balance of $485k at ages 114/120 for myself and my wife.

[arebelspy]

Worst scenario was an ending portfolio balance of $485k at ages 114/120 for myself and my wife.

I could live with that.  ;)

[mathjak107]

I want to pull the plug on work with a 5% SWR ($40k withdrawals on $800k savings).

I feel safe doing it though, because we only really need to make it 20 years before a combination of FERS retirement and Social Security cut that $40k in half

What's a cFIREsim run say on that scenario?

Sorry, I hadn't checked this thread in a couple weeks.

I used kind of "worst case" scnearios with 75% Social Security, and no raises for the next 7.5 years of work. I used an 80/10/10 equities/bonds/cash split.

It came out with a 100% success rate. Worst scenario was an ending portfolio balance of $485k at ages 114/120 for myself and my wife.

keep in mind the stress testing is only based on the shortfall that comes from your portfolio . so social security , pension , rental income , etc , are all subtracted off of what your total needs are  . the amount left is what has to come from your portfolio .

it is only the portfolio portion that is  stress tested to see if it can reliably produce the shortfall  between what you need  and your other income sources . .

[fattest_foot]

And that's why I said my SWR was 5%, since it only has to get us through about 20 years before Social Security and FERS age. That should be similar for most people (whether they have a pension or not).

Once we hit about 60 years old, Social Security (like I said, I used "worst case" of 75%, which would be the trust fund is gone rate) and FERS will knock off about half our expenses, if not more. At that point our SWR drops down to like 2.5%, assuming our portfolio were unchanged.

[Roland of Gilead]

I can see that.  We are 46 and 47 and if we start SS at 67, we will get about $2800 in today's dollars per month.  This is without working from 46 to 67.

Consider we spend about $4,000 a month now at less than 4%SWR, the $2800 will be a huge cushion.

I doubt we will spend $6800 a month unless healthcare eats it up.

A failure at our SWR probably means the end of the USA.

[Ursus Major]

For me the main concern with lower SWRs in other countries is the question of why has the SWR for the U.S. market been an exception to the upside and how likely is that to continue into the future? I'd love to get those questions answered.

I'm not sure anyone now recommends a purely 100% US stock portfolio without any international mixed in. I know our plan is a 70/30 split US/international.

Understood, but then that wasn't the essence of my comment, so let me try to express myself more clearly. I understand that diversification into less-correlated assets helps overall returns, even when those assets in and of themselves have lower returns.

My concern is that - with other countries having a significantly lower SWR in the past - the U.S.results might be just an anomaly and might not be repeated in the future. That would mean that future SWRs might be noticeably lower, even with an internationally diversified portfolio. Thus I feel some unease, when folks talk about how safe the 4% SWR is.

Regardless, some perspective: the USA's GDP as a single country is more or less what the entire European Union's GDP totals. In some sense, choosing to hold all your stocks in an EU country domestic stocks/bonds/currency is akin to having all your retirement portfolio in a single state in the USA.

Again that wasn't what my concern is about. I'm pretty sure, that the SWR of the EU territory is still lower than that of the U.S., so it's not just about size.

[mathjak107]

i would not include it . it is no different than us delay taking social security . right now our draw is 3.50% . once the 55-60k in ss kicks in we are down to 2% .

but for now it is what it is and only the actual amount is figured that we have .

[Roland of Gilead]

We sold our home and do include the money from the sale in our SWR predictions.  Amazingly, our SWR did not change as we included our home equity (discounted to reflect selling costs).  This is the best way IMO as it gives you an accurate view of your current financial situation.  A home is a asset.

[mathjak107]

a home is an asset but it is a consumption item and an expense as long as you consume it .  it is accounted  for on the expense side of things in retirement planning . it is your housing costs .

once it is sold any cash you get can surely be counted if you rent and any cash left can be counted in the income calculation base amount if you buy .

the point is you do not want to count things in the income generation base amount that can't be spent down .

a safe withdrawal rate assumes the  assets generating that income  can go to zero by the 30th year in worst case scenario's .

it is no different then delaying social security . i do not count what our ss will be when we are 70 . at just about 64 our draw rate is 3.50% but once ss kicks in at 70 it is 2%.

that is how we calculate and track things , as they stand today . .

[Roland of Gilead]

So let us say that at age 90 your portfolio goes to zero but you still have your paid off $400,000 home.  You then get a reverse mortgage and suddenly you can continue your SWR until age 98.

[mathjak107]

then you converted the asset to cash , nothing wrong with that . in effect it is like selling it .

the point is don't do things to just feel good . make sure what you count makes sense and fits in the requirements at the time you do it .

i don't count any of our art work in my calculations either . they are worth a lot but until the day comes they are no longer a consumption item and i sell them they stay off the swr calculation amount .

i believe planning should always be like steering a big ship , you nudge it along the way to keep it on course as things acting on it change

[mathjak107]

realistically there is no such thing as "renting to yourself " and counting it as income .

when you own , those are your costs of housing you and your family -period . if it is cheaper then renting,  then you are cutting expenses and existing cash is improved .

there is a big difference between cutting expenses and actually receiving more income .

while initially they appear the same cutting expenses has a bottom .after that point when expenses continue to rise you are screwed . increasing income has no theoretical limit . ideally you want both .

that is why wall street looks at profits ,which can come from cost cutting and revenue which comes from sales .

don't forget a renter with a family who goes from a 3 bedroom apartment to a 1 bedroom once everyone is out sees the same increased cash flow and they own nothing .

it is always best to keep expenses on one side and assets you want included in the basis for an income stream on the other  and do not  mix up improving existing  cash flow by cutting expenses with increasing income . there is zero reason to play that game , complicate things and try to take what are your housing costs and manipulate them .

we have different net worth statements  because there are  different net worth's we want to look at for different reasons .

income generation only contains my liquid investments i want to part with .

for estate tax purposes i have to include it all . so you have two different lists ,with different assets listed ,used for different purposes .

in fact we own two central park co-ops with rent stabilized tenants . the tenants have no interest in taking a buy out offer  .,rent is near break even and we are stuck with them until they are out .

i count those apartments only in our net worth for estate taxes . they have an open ended time as far as when we can sell them and for all other purposes they do not exist at this point .

i am not into just listing things to feel good , i need a purpose , then i will make the list that is appropriate

[mathjak107]

the problem with using a home as a piggy bank is it is not liquid . as folks found out when the time came to call it in to action the value had plummeted , they possibly couldn't sell it or even if they found a buyer the buyer may not have been able to get financing .

it isn't like more liquid assets which can be sold at the push of a button . especially because you are consuming it . many times the plan for moving gets trashed as well . family , health issues , job , etc all can make a long range plan a vapor .

but plan as you wish , i just do not think it is a good idea to include anything that may remain ill-liquid as part of an income stream .

i think it is very important thought to keep expenses on one side of the equation and income on the other  and do not take cost cutting and try to create income out of it .as i said improving existing cash  flow because owning may be cheaper is not generating more income .

if you want to play that game , then in the same view living in the house is costing you the rent you are giving up by using it yourself . if you rented somewhere cheaper you would be ahead .

so trying to turn a saving in to income and fool yourself in to thinking it isn't an expense becomes just smoke and mirrors .

leave your housing costs as expenses , that is what they are whether it is cheaper then other options or not . it is only cutting costs and costs have a bottom after which rising expenses can't be met