TXTransplant said:

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And I'm going to disagree with the thought that the ~only~ people who don't have equity are those who continually try to keep up with the Jones.

If you don't live in a major US city or (maybe) one of its suburbs, 6-7 figure home appreciation is something you just hear about on TV.

My first house, I purchased in 2004 for $155k. Sold it in 2011 for $179k. It sold in 2017 for $155k (I think it went into foreclosure) and again in 2019 for $192k.


To make money on real estate, you have to take a risk - buy in an up and coming area, do renovations, maybe spend more than you really want to, etc. I will freely admit that I have NOT done that.

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I certainly didn't say the only ones who have equity are those who don't keep up with Jones'..

I alluded to that twice in my post, once saying my houston burb house appreciated 10% in 7 years, and that houston burbs suck for appreciation because of sprawl.

But Houston is not like many large metro areas. Any where in CA, seattle, denver, austin, eastern cities.. It is not uncommon to have pretty good appreciation. But going back to Houston, any place closer to town is going to see this.. inside the loop or to lesser extent inside BW8. It's just houston (and probably dallas too) burbs that suck, because it's too easy for housing developments to show up another mile out.. people don't mind driving 50 miles to work.


But you are right, it isn't happening in Alabama, or Kansas, or other midwest city or any place that people aren't flocking to at some point

I didn't take any risks.. just bought a new house in a denver suburb that was growing quickly.. and headed towards white collar area. Before I knew it, it was up 10-15% a year for several years in a row.

Yeah, some people get lucky and just end up in the right place at the right time. I am, unfortunately, not one of those people.

I could have bought in Houston when we moved here in early 2013, but I work in The Woodlands. So, the risk for me would have been a crappy commute and a bigger mortgage. I didn't want that, so I bought in The Woodlands, too...right at the time the "Exxon is coming" hysteria hit. I think I paid a fair price for my house, but I definitely see that it has a ceiling when it comes to price.

The house before that move was in College Station. I posted previously that I lost money in that house. Sold it for only $4500 more than what I paid for it less than two years before (and still had to pay the buyers agent fees). Had I waited a year to 18 months, I could have sold it for probably $60k-$70k more. I could have afforded both mortgages but it would have been uncomfortable (there is that risk again), and I didn't want the hassle.

Some of it is perspective, too. I think if you grow up in an area where real estate is expensive, it's easier to take that first leap.

I, on the other hand, paid $155k for my first house and $240k for my second. When I started looking in The Woodlands, I had sticker shock to realize I wasn't going to find anything "decent" for under $300k.

In hindsight, I probably should have taken a leap of faith and spent a little more than what I did, but if I had, I may not have been in a position to refinance when I did. And that one decision has given me enormous financial peace of mind. I may not end up gaining a lot from appreciation, but I know if the SHTF, I can still afford my mortgage. Unlike another single mom I know who had to sell her $700k house (basically for what she paid for it 6 years ago) and move into a rental because she had to close her business.

Ha, I'm not maintaining this house after my kids leave. I'm already planting seeds that we'll just buy a few condos and hop around depending on seasons. Wife appears to be game with that.

Strat, I've met several families in HR Backcountry that made millions by just selling houses on the coasts at the right time. Then they flipped their Backcountry homes and made even more. Some people are lucky with real estate (I'm somewhat in that category) and then there's another group that are exceptional. Of course, the wives have to be on the same page. They are kinda ruthless when it's time to sell...they pull the plug.

dreyOO said:

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Of course, the wives have to be on the same page. They are kinda ruthless when it's time to sell...they pull the plug.

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My wife is begging me to cash in our $300k equity and move back to TX to buy a house cash.

Is almost always dependent on having capital to be in the right area (see coasts) and having a wife onboard to pull the trigger. Both are much easier said than done.

This. Live off less than half that you take home after maximizing 401k savings. Use the other half to pay cash for cars/toys and invest.

Took me much longer than it should have because of a few bad decisions (one WHOPPER). Decided four years ago to study Warren Buffett and stock market basics. My advice to a young person:

1) Housing: No more than 25% of take home pay on a 15 year fixed;
2) Cars: Don't be stupid. Nothing more needs to be said;
3) Avoid debt like the plague;
4) Markets: the returns can't really be matched. Understand market history and market cycles. Study successful investors like Buffett;
5) 401k? I've grown less enamored over the years. I do think it is prudent to contribute up to the match of an employer;
6) Stocks: Get active with quality companies that you understand and believe in. Companies that are healthy with a long track record of growth.

Millionaire status is very attainable in the USA. As Mr Buffett always says "never bet against America." Had I know 25 years ago what I know now...I'd be worth many times over one million.

Agree on 401k. Fees are typically still too high today. Get the company match and then direct the next dollar toward a Trad IRA/Roth IRA at a vanguard/fidelity/etc.

Only go back to the 401k after maxing out the IRA and you have no where else to direct money (like debt, house, etc)

ChoppinDs40 said:

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RockOn said:

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Agree on 401k. Fees are typically still too high today. Get the company match and then direct the next dollar toward a Trad IRA/Roth IRA at a vanguard/fidelity/etc.

Only go back to the 401k after maxing out the IRA and you have no where else to direct money (like debt, house, etc)

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Yeah but what if your 401k is with Vanguard and your options are vanguard ETFs? I still say max that thing if you can for the tax savings. Depending on your tax bracket, the savings alone is enough to max an individual HSA account or more than half your IRA maximum.

I treat those tax savings as "required" additional investment dollars. For every dollar I put in the 401k/wife's 403b, that's another 20 cents of free investment in the brokerage.

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If you have a 401k with good options and low fees no problem going more into that. You get the same tax savings you would from a 401k when you contribe to an HSA and traditional IRA as well. If you are below the payroll tax cap, you can also save payroll tax and income tax if you can contribute to your hsa via payroll deduction. After age 65 an HSA can also be used for non medical and would be taxed same as 401k for those expenses. So since the HSA will eventually be basically a 401k (without any RMD), I think that should be maxed out before going over your company match in 401k. It will also be valuable to have a mix of pre and post tax assets in retirement so you can have more control of what your annual taxable income is, so I would mix at least some amount of Roth savings in as well.

I get my company match, then max hsa, then roth ira, and anything left over I got back to 401k

Correctamundo.

I'm not as far along as I want to be but we're playing catch up now (I'm 33 wife is 31). Payroll deduct me maxing 401k and HSA and then auto contribute to brokerage and REIT.

I'm strongly considering converting my IRA to a Roth (already have a Roth and old company 401k was rolled into an IRA). I can longer contribute, tax advantaged, to my IRA so it's time to start backdooring.

I have a rollover IRA from my first job as well but I don't want to take the tax hit now rolling it over. My plan is to start rolling it over when I retire. I expect there to be a few years I am living off after tax savings and roth that my taxable income will be very close to zero. That would be a good time to do a roth conversion without taking a huge tax hit.

hypeiv said:

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I have a rollover IRA from my first job as well but I don't want to take the tax hit now rolling it over. My plan is to start rolling it over when I retire. I expect there to be a few years I am living off after tax savings and roth that my taxable income will be very close to zero. That would be a good time to do a roth conversion without taking a huge tax hit.

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What if it grows 50%+ between now and then?
$100 @ 30% bracket = $30
$150 @ 20% bracket = $30

My plan is to do it over multiple years. Assuming todays tax rates and filing married I could convert over 80k a year and pay an effective tax rate of less than 12% assuming I had no other taxable income that year, which I think will be doable based on my other roth and after tax savings. Doing the conversation today would cost me 24% so taxes would have to double (for the lowest brackets) between now and retirement for me to break even. I know some say a bird in the hand is worth two in the bush but I already have a decent mix of Roth/non-roth so no need to eat that tax today.

that's an interesting strategy... However, aren't you worried about the forced distributions from IRAs? 80k/year may not be enough to bleed it off until you just take a huge hit... unless, are you less worried about having 500+k in the IRA?

ChoppinDs40 said:

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that's an interesting strategy... However, aren't you worried about the forced distributions from IRAs? 80k/year may not be enough to bleed it off until you just take a huge hit... unless, are you less worried about having 500+k in the IRA?

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I plan to have most converted to Roth by the time RMD roll around and they don't require them since the taxes will already be paid. I might also just do all my charitable giving via QCD (Qualified Charitable Distributions) as another way to avoid paying tax on them and satisfying my RMD requirements.

I'm 48 and have now hit the stage of legitimately contemplating an age I can retire at. I have a good chunk of change after these past few years of run up.

I'm a big corporation drone with the bulk of our retirement savings in a Vanguard 401K through my company. Also have some Fidelity 401K from my wife's job and some Roth Ira's we self funded, but basically all of that is in S&P 500 indexes and other blended mutual funds.

For someone with savings such as ours, what rate of return should we assume in our calculations, both prior to retirement and in retirement? To make it even easier - what rate of return would you assume in the future just for an S&P 500 index fund? I'm using an assumption of an annual 5% return on investment (this is not inflation adjusted) prior to retirement and 4% in retirement, and I hope these are on the conservative side if anything. My spreadsheet planner also has the goal of having money through age 100 - which is highly unlikely for me but I did have a grandfather live to 103 and again, I want to plan for worst case as far as financial assumptions.

Would you agree that a 5% and 4% rate of return for an S&P 500 index fund annual average return, over the next 40 years, is on the conservative side? With little change of it ending up less than that over that time frame, when averaged out? I put in a 6% instead of 5% and it makes a huge difference.

Historically, it's around 10%. A lot of financial people say to assume 7%.

I am fairly conservative especially with projections so I typically use 5% for forecasting.

Complete Idiot said:

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I'm 48 and have now hit the stage of legitimately contemplating an age I can retire at. I have a good chunk of change after these past few years of run up.

I'm a big corporation drone with the bulk of our retirement savings in a Vanguard 401K through my company. Also have some Fidelity 401K from my wife's job and some Roth Ira's we self funded, but basically all of that is in S&P 500 indexes and other blended mutual funds.

For someone with savings such as ours, what rate of return should we assume in our calculations, both prior to retirement and in retirement? To make it even easier - what rate of return would you assume in the future just for an S&P 500 index fund? I'm using an assumption of an annual 5% return on investment (this is not inflation adjusted) prior to retirement and 4% in retirement, and I hope these are on the conservative side if anything. My spreadsheet planner also has the goal of having money through age 100 - which is highly unlikely for me but I did have a grandfather live to 103 and again, I want to plan for worst case as far as financial assumptions.

Would you agree that a 5% and 4% rate of return for an S&P 500 index fund annual average return, over the next 40 years, is on the conservative side? With little change of it ending up less than that over that time frame, when averaged out? I put in a 6% instead of 5% and it makes a huge difference.

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you just have to believe that what you have * 4% is enough to live off.

And then earn 4%+inflation of 3% to keep the nest egg in tact for your kids/charities.

Unless you want to deplete it, then it's just a time table. I suggest getting a CFP or look at some robots or personalcapital.com to see where your portfolio shakes out over time.

Also need to think about how much you will SPEND in retirement.

2 houses, vacations, country club, 2 cars, kids still in college?

or, house paid off, travel in an RV and cook meals on your green egg?

one requires a significantly larger nest egg than the other.

I assume 5.5% for long term S&P. Specifically, I'm assuming 6.5% notional but 1.0% inflation.

My goal is to be overfunded by enough that I never really shift assets towards less volatile, lower return allocations.

DonaldFDraper said:

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Historically, it's around 10%. A lot of financial people say to assume 7%.

I am fairly conservative especially with projections so I typically use 5% for forecasting.

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Sounds good - you consider 5% doable but on the conservative side. Same thoughts I have, appreciate the feedback.

I think over the longest historic period possible it's 10% but more like 8% over last 30 years (or at least maybe the 30 years before 2018 or so). I do think it will be 8% or even lower going forward but hopefully no worse than 5%!

Thanks for the feedback, I do have an estimate for our retirement spending that I plug into the spreadsheet, correct for taxes and inflation, and subtract out of the bucket annually. Basically want to maintain our lifestyle but estimating healthcare costs seems like a big one to mess up. I'm guessing around $20K/year, on average, through our retirement years.

I do like the "withdraw 4% annually" approach and look at it that way as well. I've gone to MySSA and seen what they estimate our Social Security payouts will be, but that also seems like an area of risk due to the dire news you hear time to time about the future of SS funding.

FrioAg 00 said:

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I assume 5.5% for long term S&P. Specifically, I'm assuming 6.5% notional but 1.0% inflation.

My goal is to be overfunded by enough that I never really shift assets towards less volatile, lower return allocations.

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Thanks - my thought process as well.

RockOn said:

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Agree on 401k. Fees are typically still too high today. Get the company match and then direct the next dollar toward a Trad IRA/Roth IRA at a vanguard/fidelity/etc.

Only go back to the 401k after maxing out the IRA and you have no where else to direct money (like debt, house, etc)

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What fees are "high" in your 401k? Admin or fund expense ratio? It shouldn't cost a participant more than $10-20/year in admin expenses and 1% to 1.25% in overall fund expense including service provider commissions.

My wife and I have always worked for very large, public companies, which have offered very low cost 401k plans through Fidelity/T.Rowe, but I've heard that 401k fees at smaller companies can be absurd. Like >2%

That's really high.

My wife and I both do the IRS max in our 401k's.

Who do yall use for umbrella insurance coverage?

Last year closed the gap to quite a bit. What a stock market run. If I get similar returns in '21 as I did in '20, I'll be about $15k away from joining this 7 figure club. So here's to hopefully next year, possibly this year. I'm 40.

Whoever you have your primary auto with.

MAS444 said:

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Whoever you have your primary auto with.

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That's what I do. State Farm, believe it or not.

I will say that Chubb and AIG Private Client Group are the two super-high-service options (most HNW clients use one or the other), but you pay for that. If you just want reasonably priced umbrella coverage, get competing quotes for your entire bundle of home, auto, boat, jewelry, umbrella, etc. from multiple companies (and independent brokers, as well). And repeat it every year or two.

I also have State Farm. I had to upgrade my auto policy to qualify for the umbrella, but with a just-turned-16 driver, it was worth it.

Cost is something like $212/year, but I expect it will go up when it renews in March, since the teenager is officially licensed.

I bleed maroon said:

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MAS444 said:

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Whoever you have your primary auto with.

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That's what I do. State Farm, believe it or not.

I will say that Chubb and AIG Private Client Group are the two super-high-service options (most HNW clients use one or the other), but you pay for that. If you just want reasonably priced umbrella coverage, get competing quotes for your entire bundle of home, auto, boat, jewelry, umbrella, etc. from multiple companies (and independent brokers, as well). And repeat it every year or two.

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This. Shop umbrella just like you would any other insurance.

One other thing I recently discovered and it's random so don't feel like starting a thread for it. On your home insurance, you can add to your Dwelling Coverage A replacement cost with additional replacement cost coverage for almost nothing. I added $250k to ours for literally $4 additional dollars per year.