Quote:
Originally Posted by disneysteve
I think that is a meaningless figure since the home's value is of no significance to the retirement plan, but since you asked...
I just did a quick calculation because I never really thought about it before. If we build a nest egg of $2.5 million and our home appreciates at 5%/year, we'd end up with a home worth $675,000. That is a total of $3,175,000. The home's value would be about 21% of that total.
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I agree with this....
the percentage is meaningless. If someone LBYM, they might have a small house and 8 figure portfolio.
At same time someone on a coast might tell you their house is 20%, 30% or 50% and the downsize of the house is needed as part of retirement plan with similar 8 figure portfolio.
The calculation depends on numerous factors:
1) how early a person retires. If two people with same house making same salary retire, but one person retires 20 years before the other, the person which retired first needs a lower percentage (because porfolio is larger to last 20 years longer).
2) where a person lives. See example above.
3) how early a person started saving. I started saving at age 23 and have a house valued at 350k+ right now which will be paid off prior to retirement. My portfolio will be able to compound faster because of the early investments, so a house valued at 3X our annual income now seems expensive, but we also set aside 16% of our income for retirement and are only 35 yo right now.
4) How much the house appreciates. You could build the same house I have in another location (west coast) and it will appreciate faster than houses which are smaller. So my house might appreciate 2% per year, where as same house on a coast appreciates 5% per year. Do you base the calculation off purchase price or value at retirement. This variable is why this premise is too complicated.