Author Topic: Allocation of Wealth between Family Home, Retirement Pots & Other Savings  (Read 3018 times)


  • 5 O'Clock Shadow
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Any views on the "right" ratio of wealth distribution between your home, untaxed retirement accounts & taxed savings.

I am currently at 36% family home, 55% pension pots (in the UK no tax going in but income taxed coming out), 9% in savings (in UK already taxed but income is tax free).

I live in quite a big house which Mr MMM would not approve of but there are 5 in my brood & the home will not perform as an investment & possibly a drag on wealth building.

I feel I should have more in the savings pot which has the greatest liquidity but the tax advantages to a 40% tax payer of cash into pension pot currently seem too hard to resist.

My only debt is a mortgage which is about 5% of my asset stack & currently costs me 1.5% pa.


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  • Senior Mustachian
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Any views on the "right" ratio of wealth distribution between your home, untaxed retirement accounts & taxed savings.

My view: there is no such thing as the "right" ratio.

I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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  • Walrus Stache
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My opinion is that you shouldn't view your home as part of your asset allocation unless you are so fabulously wealthy that your only concern is inheritance.  For the rest of us, we need somewhere to live and even a mortgage-free house is going to require taxes and upkeep costs, making your home an indefinite expense, not an asset.  Once you're dead and your heirs sell it off, then it can be an asset.

Other than the house, my plan is to maximize retirement pots each year to take full advantage of the tax deduction while I am working and in a high tax bracket.  Then I fund my Roth IRA and then my taxable accounts with whatever else I can spare. 

I can retire as soon as the taxable account gets large enough that it can cover my expenses (when paired with penalty-free early withdrawals from my retirement accounts) for long enough to reach pension and social security age.

So for me the "right" balance is always changing, depending on how soon I think I can retire.  If I want to retire in five years it is a very different distribution than if I want to retire in 15 years.


  • 5 O'Clock Shadow
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Good point sol, save for the fact that once the chicks have lest the next I plan to downsize and release circa $200k into my retirement funds.

My fear is I am locking too much into difficult to access accounts at the moment. I have lost my job twice before & having a bigger accessable pot would be good, but it is tax ineffecient way to build my stash.


  • Bristles
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I am unsure of the laws in the UK, but when can you access your pension pots? I would be hesitant to lock away money long term into something that I have no control over investment return and have to wait for their release. (I am comparing it to superannuation in Australia...)
I would pay down the mortgage to save on interest, unless you are earning more savings on the same amount in a savings (after tax).
We also have a redraw on our mortgage, which is an account that we can access at any time but while the $ are in it they save us interest on our mortgage.
It depends on age, when you plan to retire and your lifestyle, I think.


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