What is a Boglehead's net worth?
Re: What is a Boglehead's net worth?
Suggestion: Maybe all polls should have to be approved (and edited) by a moderator before being posted. So many bogleheads polls have a poorly formulated question or unclear choices, and lead to 20+ confused responses and bad data. All I have learned from this poll is that we have at least 10 members in the set {people with net worth > 50m, people who don't understand K notation, mischievous net worth inflators}.
This is not meant to be a harsh criticism; writing a clear poll can be harder than it looks!
This is not meant to be a harsh criticism; writing a clear poll can be harder than it looks!
Re: What is a Boglehead's net worth?
Mostly I consider real estate a liability until sold, and it has no impact on AA unless I need more income to pay for expenses. I still think that income generation from assets to be a better measure than net worth. In this low interest rate environment 1MM cannot generate as much income as it did 5 years ago, a fact not lost on retirees.
"Let us endeavor, so to live, that when we die, even the undertaker will be sorry." Mark Twain
Re: What is a Boglehead's net worth?
So if a person has -$400k in home equity and has $100k saved, then by this poll's definition, their net worth would be just $100k?
Another person has +$400k in home equity and the same $100k saved, and their net worth would also be just $100k?
Though I understand the reasoning to not include home equity in AA, it seems ridiculous not to include it in net worth. Net worth, to me, is "If I (and spouse) were gone tomorrow, how much would be left?", not "How much do we have liquid access to now?".
Another person has +$400k in home equity and the same $100k saved, and their net worth would also be just $100k?
Though I understand the reasoning to not include home equity in AA, it seems ridiculous not to include it in net worth. Net worth, to me, is "If I (and spouse) were gone tomorrow, how much would be left?", not "How much do we have liquid access to now?".
Re: What is a Boglehead's net worth?
Ironically, I think you're making a similar mistake. Some in finance use "M" to mean "thousand" and "MM" to mean million, so they'd argue that you're saying fifty thousand above when you mean fifty million.poundwise wrote:{people with net worth > 50m, people who don't understand K notation,
Re: What is a Boglehead's net worth?
To be meaningful, looking at net worth should be in the context of one's age. Geing worth $100,000 at age 25 is very different than the same net worth at age 65.
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Re: What is a Boglehead's net worth?
Hazzah! I do this too. People are too afraid of estimates (future taxes, home value, etc). There is nothing wrong with changing them in the future when new facts emerge. And a conservative estimate is better than pretending it isn't there.trudy wrote: I reduced my net worth for the poll by taking into account the reduction of my Traditional IRAs by projected taxes. Not doing so is counting imaginary money.
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Re: What is a Boglehead's net worth?
NAVigator wrote:This thread gets funnier with time. The Bogleheads now have 10 members with a net worth exceeding 50 Million dollars. I am amazed - but it is not about the net worth!
This reminds me of the old joke: There are 10 kinds of people in the world; Those that understand binary and those that don't.
Jerry
The 50 or 60 million dollar question is what are they doing here
"When nothing goes right....go left"
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Re: What is a Boglehead's net worth?
I think these polls generally should not be taken too seriously. Not only are they typically vague/not worded correctly, the much bigger picture is that they do not come from a representative sample of BH users. Since the OP pollster has no control over who responds to a survey, you don't know who is answering and the survey has a self-selection bias. For instance, if we know that 10% of BH users actually come from the West, but 20% of survey responders come from the West then there is a sample bias. In other words, the poll takers overrepresent the West by 2 to 1. Net, net the surveys results are skewed and essentially misleading. Personally, I would take these polls with a serious grain of salt.poundwise wrote:Suggestion: Maybe all polls should have to be approved (and edited) by a moderator before being posted. So many bogleheads polls have a poorly formulated question or unclear choices, and lead to 20+ confused responses and bad data. All I have learned from this poll is that we have at least 10 members in the set {people with net worth > 50m, people who don't understand K notation, mischievous net worth inflators}.
This is not meant to be a harsh criticism; writing a clear poll can be harder than it looks!
"When nothing goes right....go left"
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Re: What is a Boglehead's net worth?
EternalOptimist wrote:NAVigator wrote:This thread gets funnier with time. The Bogleheads now have 10 members with a net worth exceeding 50 Million dollars. I am amazed - but it is not about the net worth!
This reminds me of the old joke: There are 10 kinds of people in the world; Those that understand binary and those that don't.
Jerry
The 50 or 60 million dollar question is what are they doing here
I wouldn't be surprise if they are here, many richer folks are frugal...(or cheap)
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Re: What is a Boglehead's net worth?
However this poll confirms what all our other net worth surveys have confirmed, mine included: The active Bogleheads, at least as far as they respond to polls, are far from average Americans, financially speaking. I don't think there is any doubt that is true.
Re: What is a Boglehead's net worth?
I don't think the poll is ambiguous at all. Anyone with a high school education understands that K stands for thousand. as in kilogram, kilometer, kiloton, etc.
I think real estate and vehicles should be separate from net worth in the vast majority of cases. The only exception to this would be someone who owns a large number of rental properties producing a positive cash flow which supports their lifestyle without depending on other sources of revenue and has a realistic discounted valuation of these, otherwise most people tend to unrealistically overestimate their real estate value.
If someone has a $100K portfolio, a $400K home (whether or not it is mortgaged or paid for) and a $20K automobile, I consider them to have a net worth of $100K.
Valuations of real estate and vehicles can be dicey and unpredictable. I once included my home's anticipated value in my net worth. When the real estate crash hit, I was still carrying a mortgage. When I eventually sold it because I had to move, it wasn't worth nearly as much as I had projected. I agree that a home should be considered a liability, even if paid in full. It's a place that you pay real estate taxes, utilities, insurance, mortgage, routine maintenance and upkeep, HOA dues, etc to lay your head down at night. Only when it's sold should you consider it an asset in your net worth valuation.
To think otherwise is foolish and irresponsible. I know many cash poor, land 'rich' people who can't afford to spend another $50 a month, yet if you included their home's value - you'd say they were millionaires.
Do as you wish. Just remember this song http://www.youtube.com/watch?v=l8bJOwbILts.
I think real estate and vehicles should be separate from net worth in the vast majority of cases. The only exception to this would be someone who owns a large number of rental properties producing a positive cash flow which supports their lifestyle without depending on other sources of revenue and has a realistic discounted valuation of these, otherwise most people tend to unrealistically overestimate their real estate value.
If someone has a $100K portfolio, a $400K home (whether or not it is mortgaged or paid for) and a $20K automobile, I consider them to have a net worth of $100K.
Valuations of real estate and vehicles can be dicey and unpredictable. I once included my home's anticipated value in my net worth. When the real estate crash hit, I was still carrying a mortgage. When I eventually sold it because I had to move, it wasn't worth nearly as much as I had projected. I agree that a home should be considered a liability, even if paid in full. It's a place that you pay real estate taxes, utilities, insurance, mortgage, routine maintenance and upkeep, HOA dues, etc to lay your head down at night. Only when it's sold should you consider it an asset in your net worth valuation.
To think otherwise is foolish and irresponsible. I know many cash poor, land 'rich' people who can't afford to spend another $50 a month, yet if you included their home's value - you'd say they were millionaires.
Do as you wish. Just remember this song http://www.youtube.com/watch?v=l8bJOwbILts.
If I have seen further, it was by standing on the shoulders of giants.
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Re: What is a Boglehead's net worth?
Net worth has a standard and widely accepted definition.
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Re: What is a Boglehead's net worth?
Not as standard and widely accepted based on comments on this thread, letsgobobby.
364
Re: What is a Boglehead's net worth?
I think to a large extent you and the OP are confusing net worth with investable assets.Stonebr wrote:I usually exclude it from mine for setting my AA because:sscritic wrote:My net worth includes my house. I didn't have one, and I had a certain net worth. I then sold some bonds and bought my house. My net worth did not go down. Why do you think your home equity is not part of your net worth?
I know mine is. When I die, my children will be able to spend what they get from the sale of my house just as easily as what they will get from the sale of my shares in Total Stock Market. The sale might take more time, but the value of the dollars from the house will be no less than the value of the dollars from TSM.
1) I don't get a reliable daily price quote from Mr. Market.
2) I view it as a financial equivalent to renting and I have to live somewhere.
3) There are other assets that I own like art, coins, antiques, and yard sale stuff that I can't quantify.
4) Have to draw the line somewhere.
They are two different things.
I answered for investable assets as that seems what the OP wanted, but use the wrong term.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
Re: What is a Boglehead's net worth?
Just because people don't know the accepted definition, or they don't like it, does not mean there isn't one.travellight wrote:Not as standard and widely accepted based on comments on this thread, letsgobobby.
While not exhaustive, after looking at 10 web sites with definitions I only found one definition.
Net worth = sum of the value of all assets - sum of the value of all liabilities.
As noted by others, this is the only definition that is self consistent.
The only argument then is that a house is somehow not an asset (i.e. has no value) and a mortgage not a liability. While that is an argument some try to make, really makes no sense at all.
What it all really means is that some people prefer to only think about investable assets. Which is fine, but they should just say so, rather than inventing new definitions for perfectly fine existing words. Both concepts have their place and have well established word to denote them.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
Re: What is a Boglehead's net worth?
The investment asset sales industry has a vested interest in convincing people to exclude their real estate from net worth calculations.
By doing so customers feel poorer which increases their incentive to place more of their money with companies that market investment assets.
Building real estate equity, reducing debt, investing in collectibles etc. competes directly for dollars with the financial investment industry.
If you want to sell funds it's best to have people in a mindset where the ONLY way to increase net worth is by increasing the investment security side of the balance sheet.
By doing so customers feel poorer which increases their incentive to place more of their money with companies that market investment assets.
Building real estate equity, reducing debt, investing in collectibles etc. competes directly for dollars with the financial investment industry.
If you want to sell funds it's best to have people in a mindset where the ONLY way to increase net worth is by increasing the investment security side of the balance sheet.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
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Re: What is a Boglehead's net worth?
+1Rodc wrote:Just because people don't know the accepted definition, or they don't like it, does not mean there isn't one.travellight wrote:Not as standard and widely accepted based on comments on this thread, letsgobobby.
While not exhaustive, after looking at 10 web sites with definitions I only found one definition.
Net worth = sum of the value of all assets - sum of the value of all liabilities.
As noted by others, this is the only definition that is self consistent.
The only argument then is that a house is somehow not an asset (i.e. has no value) and a mortgage not a liability. While that is an argument some try to make, really makes no sense at all.
What it all really means is that some people prefer to only think about investable assets. Which is fine, but they should just say so, rather than inventing new definitions for perfectly fine existing words. Both concepts have their place and have well established word to denote them.
"When nothing goes right....go left"
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Re: What is a Boglehead's net worth?
lol, you're preaching to the choir (although I got tired of singing), but very well put.Just because people don't know the accepted definition, or they don't like it, does not mean there isn't one.
While not exhaustive, after looking at 10 web sites with definitions I only found one definition.
364
Re: What is a Boglehead's net worth?
ask me again in 30 years when I am nearing retirement instead of basically just entering the workforce. lol
Re: What is a Boglehead's net worth?
Portfolio valuations can likewise fluctuate (wildly as the last market crash showed us) before one needs to draw upon them. Extending this logic, should one then not include any bonds or equities in one's net worth because those assets might be worth less when one needs to draw upon them? Net worth isn't supposed to be a guarantee of asset value, just a current snapshot in a constantly changing environment.Swampy wrote:Valuations of real estate and vehicles can be dicey and unpredictable. I once included my home's anticipated value in my net worth. When the real estate crash hit, I was still carrying a mortgage. When I eventually sold it because I had to move, it wasn't worth nearly as much as I had projected. I agree that a home should be considered a liability, even if paid in full. It's a place that you pay real estate taxes, utilities, insurance, mortgage, routine maintenance and upkeep, HOA dues, etc to lay your head down at night. Only when it's sold should you consider it an asset in your net worth valuation.
Re: What is a Boglehead's net worth?
How do you define a net worth with pensions from those with a 401K? That's a huge difference as my wife and I have good pensions, but that can't be defined as a net worth because there is no lump sum value.
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Re: What is a Boglehead's net worth?
I think there IS a way to assign a lump sum value to your pension. There was a net worth thread about a year ago that was very thorough with spread sheets. I had mentioned my pension and the OP of the thread was able to assign a lump sum value for that so there must be a calculator somewhere. For example, if you will make 100k in your pension starting at age 65, they can calculate the lump sum you would have needed to have saved to provide that. It made my net worth seem huge. I did not use pension or SS in my answer on this thread.
364
Re: What is a Boglehead's net worth?
okay, I plugged in it an annuity calculator. Together our pensions would be valued at $2.5 million at retirement. That seems pretty high, but what do I know. That is at monthly withdrawal rate of about $12K (for both) at retirement at age 60 (although we are younger than that now).
The problem with pensions unlike a 401k, is that money cannot be transferred to anyone else, such as our children.
I had a thread in here a while ago asking what was the net worth of the average American subtracting out retirement savings and primary housing. Overall I seemed to get a sour response as that would be close to nil. I'm assuming more net worth is tied up in retirement or housing, although that might not be a reflection of bogles.
The problem with pensions unlike a 401k, is that money cannot be transferred to anyone else, such as our children.
I had a thread in here a while ago asking what was the net worth of the average American subtracting out retirement savings and primary housing. Overall I seemed to get a sour response as that would be close to nil. I'm assuming more net worth is tied up in retirement or housing, although that might not be a reflection of bogles.
Re: What is a Boglehead's net worth?
Pensions may or may not be there when you go to collect or they may be taken over by PBGC and limited to a fraction of what they would have been. Public pensions too are coming under pressure. Then again funds in my IRA are subject to the market. Even SS is somewhat uncertain. Others have noted the uncertainty of home values.
Re: What is a Boglehead's net worth?
these are public pensions with good funding...
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Re: What is a Boglehead's net worth?
you, with a pension, is definitely different than someone else with an identical net worth without a pension. Sure, pensions COULD change, but so could your stock portfolio and real estate holdings. In fact, your stock portfolio changes measurably daily. The others are less acutely measurable but are still of value.
364
Re: What is a Boglehead's net worth?
A couple with two good pensions might be able to retire with a net worth of $0. Calculating the net present value of a pension doesn't help you prepare for retirement. What matters is annual cash flow. People who don't have pensions need to convert assets to cash to spend; if you have income from a pension you may never need to convert assets to cash to pay expenses.
Think of Government pensions as income even though you aren't working -- not as assets which can have a value placed on them.
Think of Government pensions as income even though you aren't working -- not as assets which can have a value placed on them.
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
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Re: What is a Boglehead's net worth?
Some comma's would be nice or rather are essential. $50,000K is much clearer than $50000k. How many zero's is that? I'm all about numbers and was off on my first vote (sorry wasn't careful).poundwise wrote:Suggestion: Maybe all polls should have to be approved (and edited) by a moderator before being posted. So many bogleheads polls have a poorly formulated question or unclear choices, and lead to 20+ confused responses and bad data. All I have learned from this poll is that we have at least 10 members in the set {people with net worth > 50m, people who don't understand K notation, mischievous net worth inflators}.
This is not meant to be a harsh criticism; writing a clear poll can be harder than it looks!
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Re: What is a Boglehead's net worth?
Doesn't matter if I do or don't include cars and houses.....it doesn't change the "class" i'm in anyway.
WISDOM comes with age... But sometimes it's an optional feature.
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Re: What is a Boglehead's net worth?
What I have learned from this thread.
I am not a millionaire. I am a 1000k'er.
I am not a millionaire. I am a 1000k'er.