What's your net worth break down? What's ideal?

berg · Post by **berg** » Sun Jun 28, 2015 10:26 am

I can't seem to find any recommended net worth breakdowns. Perhaps this is because so much is variable that it is hard to have a rule of them. Curious what other Bogleheads look like. Do you have any rules of thumb with your total net worth?

For what it's worth we are a married couple in our early 30's with one child.

29% - Retirement accounts
25% - Cash/CDs (keeping a bunch here to fund a home addition or down payment on a bigger home in the next few years)
18% - Vested stock options (after tax estimate, planning to sell more during next open period to bring it closer to 13%)
16% - Home equity
12% - Taxable investments
<1% - Son's 529

dbr · Post by **dbr** » Sun Jun 28, 2015 11:04 am

There surely is no ideal.

Perhaps some things that could be thought about would include:

1. Are you "house poor"? That however is a cash flow issue but might be a concern if the real estate one lives in dominates worth.

2. Is the 529 on schedule to meet needs?

3. Vested stock options are probably not an asset but a future income item. I assume you mean ISOs or NSQs you could exercise but should hold to near expiry. The problem is these have so much leveraged risk they really aren't assets comparable to other things.

JDCarpenter · Post by **JDCarpenter** » Sun Jun 28, 2015 11:13 am

Agree with dbr that in real life, there is no ideal. (But, would love it if we had 100% in Roth!)

Looking only at financial assets, in our mid-50s, we are m/l 85% deferred accounts, m/l 4% Roths, and about 10% other. Once we retire, we will wish it were arranged otherwise (and will fairly aggressively convert to Roths), but during the high-tax accumulation phase it has made sense.

Neither of us ever employed at places with stock options, and we've not owned rentals.

YttriumNitrate · Post by **YttriumNitrate** » Sun Jun 28, 2015 12:54 pm

I think my ideal would be:

99.99% stock investments
0.01% everything else

Of course, the key part of making this allocation ideal would be that the 0.01% would still be quite a large number while the 99.99% is a ludicrously large number like 350,000 shares of Berkshire Hathaway.

Broken Man 1999 · Post by **Broken Man 1999** » Sun Jun 28, 2015 1:27 pm

I'm not sure there is an "ideal" breakdown, even if considered by age, income, or other factors.

A major item for most includes a home, which can cause significant swings in the breakdown as a mortgage is paid down, or off.

FWIW, here is our breakdown:

Investments: 88%
Grandchildren's 529 accounts: .27%
Retirement Accounts: 99.73%
Tax-deferred: 99.45%*
Vanguard Annuity: 7.9%
Vanguard Rollover IRAs: 80.2%
Vanguard Roth IRAs: 5.5%
US Savings Bonds Series EE & I: 6.4%
Taxable: .55%
Vanguard Brokerage Account: 100%
Home / auto / personal property: 12%

* With that percentage in tax-deferred, I will need a good withdrawal strategy or I will be taking a thumping from taxes!

Broken Man 1999

Nicolas · Post by **Nicolas** » Sun Jun 28, 2015 2:31 pm

deleted

srj · Post by **srj** » Sun Jun 28, 2015 3:10 pm

I'm 29, no debt but also no major assets (renting, no car):
49% Retirement investments
19% Cash
19% Taxable index investments
13% Vested company stock holdings

I've been focused on building the retirement accounts to try and make the most out of 30 years of compounding interest potential. More recently I've been making an effort to grow the cash/taxable portion of the pie to use as an eventual home down payment.

bcjb · Post by **bcjb** » Sun Jun 28, 2015 3:40 pm

I agree that there's no ideal breakdown. Make sure that not too much of your net worth is tied up in your house. Also, if you'd like to retire early, you will need fairly substantial taxable investments.

FWIW, our breakdown is:
41% taxable
54% retirement
5% cash, I bonds

galeno · Post by **galeno** » Sun Jun 28, 2015 6:38 pm

Actual

53% Retirement port
20% Personal residence
10% Family business
10% Commercial RE
07% Pension

100% Total

Ideal

60% Retirement port
10% Personal residence
10% Family business
10% Commercial RE
10% Pension

100% Total

Aptenodytes · Post by **Aptenodytes** » Sun Jun 28, 2015 7:09 pm

1) I can't see how there could possibly be any ideal net worth breakdown.
2) If you were going to attempt one anyway, you'd need both a credit and a debit entry in your ledger. Yours has only credits so one wonders where the "net" went.

Cindyjrn · Post by **Cindyjrn** » Sun Jun 28, 2015 8:08 pm

Aptenodytes wrote: 2) If you were going to attempt one anyway, you'd need both a credit and a debit entry in your ledger. Yours has only credits so one wonders where the "net" went.

What?

Grt2bOutdoors · Post by **Grt2bOutdoors** » Sun Jun 28, 2015 8:18 pm

Ideal - 1/3 in land/home, 1/3 in business and keep 1/3 in reserve (or something like that from the Talmud).
In other words, don't place all of your eggs in one category. I would not count stock options unless you are clearly in the money and you are vested, otherwise you are assigning value to something that could expire worthless before exercise.

galeno · Post by **galeno** » Sun Jun 28, 2015 8:51 pm

Debt = 0%. Both actual and ideal.

Aptenodytes wrote:1) I can't see how there could possibly be any ideal net worth breakdown.
2) If you were going to attempt one anyway, you'd need both a credit and a debit entry in your ledger. Yours has only credits so one wonders where the "net" went.

Aptenodytes · Post by **Aptenodytes** » Sun Jun 28, 2015 8:56 pm

Cindyjrn wrote:
Aptenodytes wrote: 2) If you were going to attempt one anyway, you'd need both a credit and a debit entry in your ledger. Yours has only credits so one wonders where the "net" went.
What?

Net worth is the sum of your or assets and liabilities. If you have no liabilities then you are just talking about your assets and there's no need to bring the concept of net worth into the equation. But if you have liabilities then you probably want to portray them explicitly, not hide them under the net position within each category. E.g. to say that 16% of your net worth is in home equity obscures how big your mortgage is and what the home is worth. Someone could have 16% of their net worth in home equity and be debt free; another person could have 16% of their net worth in home equity and be $10 million in debt. If you are searching for the ideal break down you probably don't want to paper over those differences.

sambb · Post by **sambb** » Sun Jun 28, 2015 9:35 pm

There is no "ideal" as it depends on housing, whether or not one has student loans, and whether or not one intends to pay for college for one's own kids.

If you have a net worth of 500k, but intend on paying for 3 kids to go to college starting in 2 years, then your net worth is frankly much less meaningful due to future liabilities.

MathWizard · Post by **MathWizard** » Sun Jun 28, 2015 10:29 pm

Part of your wealth is human capital.

As you get closer to retirement, this is going down, so retirement must go up.

I would suggest that any ideal % net worth breakdown that is independent of age
would have take that into consideration.

cheese_breath · Post by **cheese_breath** » Sun Jun 28, 2015 10:51 pm

74 years old - Approximately

0.55% ….Stock - tIRA
20.03% ….Stock - Roth
2.33% ….Stock - Taxable

34.52% ….Fixed Income - tIRA
8.73% ….Fixed Income - Roth
7.22% ….Fixed Income - Taxable

23.66% ….Home Equity
2.96% ….Personal Property (cars, home furnishings, collectables, etc.)

edits:
No debt.
Pensions and social security not included in the above.

Sheepdog · Post by **Sheepdog** » Sun Jun 28, 2015 10:55 pm

What's ideal? Ideal for whom? We are too different.
Anyway, this old guy, deep in retirement, has a breakdown of
15% home equity
29% Traditional IRA
28% Roth IRA
16% I Bonds
12% CDs and short term"cash" are my only "taxable" accounts.

I left out other personal property as I don't include them in my net worth. Plus, I don't have any debts.

edit for additional comment:
As you notice, there is very little taxable investments and therefore little source of taxable income. The investments within the above, along with Social Security, has provided good income with no to very little annual federal income taxes. That has made it ideal for me.

Jerry55 · Post by **Jerry55** » Sun Jun 28, 2015 11:37 pm

Tooo Many variables. Depends on ones age, and too many other factors.

Bacchus01 · Post by **Bacchus01** » Mon Jun 29, 2015 9:02 am

Don't know what ideal is, but here's ours. Age: mid-40's.

Tax Preferred: (49%)
401K accounts: 39%
529 accounts: 4%
HSA accounts: 1%
Roth IRAs: 5%

Taxable: (51%)
Real Estate Equity: 13%
Vanguard Funds: 33%
Cash: 5%

Plus, should have 2 pensions coming at 65+.

Bill M · Post by **Bill M** » Mon Jun 29, 2015 9:33 am

Breakdown depends a lot on employer benefit provisions (like whether after-tax 401a contributions are allowed).
That qualification being added, my breakdown is:
47% pre-tax retirement accounts (401k, 403b, tIRA)
17% Roth retirement accounts (Roth-401k, Roth-IRA)
36% taxable investments
(Home equity I don't track, since its illiquid; 529s and UGTMAs are cashed-out)

kaudrey · Post by **kaudrey** » Mon Jun 29, 2015 9:58 am

We are in our mid-40s:

Tax-Deferred:
39% TSP
17% 401(K) and IRAs
1% Roth

Taxable/Other
16% Brokerage Account
1% cash
26% real estate equity

markcoop · Post by **markcoop** » Mon Jun 29, 2015 11:45 am

I have actually thought of this in the past. I feel very comfortable with my retirement savings but not as comfortable with my savings to get me to retirement. This is probably due to me constantly wanting to max out retirement benefits. I could always raid some of that money (like ROTH contributions) if I need to.

I'm 49. Not counting house/kids, I'm at 90% retirement and 10% taxable (and some of that 10% is in I-bonds that I really don't want to cash in).

whatusername? · Post by **whatusername?** » Mon Jun 29, 2015 2:07 pm

It really should change with your age and the size of your pie.

Right now in my mid-30s, my retirement accounts are about 60% of my NW, house is about 32%, and everything else (mostly cash, vehicles, and actually valuable personal property) is the remaining 8%. As time goes on, I expect the house to shrink, the retirement accounts and everything else to grow.

Ideal depends on circumstances. I have relatively few obligations; I can afford to be heavy in my retirement and house. If I had children, my picture would probably look a lot different if "ideal."

DVMResident · Post by **DVMResident** » Mon Jun 29, 2015 2:44 pm

Age: 32/36

Breakdown:
ER Fund: 6%
RE, rental: 41%
Retirement accounts (IRA, 401(k)): 53%*

*Doesn't count tax status, which is ~55% ROTH. Too lazy to breakdown pre- vs ROTH on retirement accounts and unrealized gains on rental that will be subject to recapture.

k5 · Post by k5 » Mon Jun 29, 2015 2:53 pm

I had this thought the other day, and instead of a net worth % breakdown, I was thinking of bucketing the savings/contribution inflow, and how that breakdown contributes to net worth and future expenditures.

Broadly thinking, saving can be grouped as short/med/long:

- Short term (vacations this year, saving for birthday gifts - planned expenditures this year)
- Medium Term (house, car, kids, college tuition for kids?)
- Long term (retirement)

Of course this is going to vary according to many things (age, stage of life, location, job, and many other factors), but I would appreciate anyone's insight who has spent time thinking about this:

Assuming a total savings rate (let's just say 30%), and 30-40 years of age, what percentage of savings would go into each of those "buckets"?

Me personally: As an informal rule of thumb, I have always said - 20% of every dollar is saved for the faraway future. Most say it is hard to do, but I have always psychologically imposed a smaller "salary" on myself, and just carved that 20% away before I can see it. So in my world, 20% gets blindly thrown goes to the "retirement" bucket. But then I start thinking of expenses this year, and the next 5-10 years and beyond a bit - I don't believe those medium term expenditures should come out of that 20% bucket (or whatever % decided to contribute to retirement).

Then I start thinking - How do I figure out a % or dollar amount to dedicate saving towards many large, but also unknowable future medium term expenses. For example, I currently live in an apartment, and while I don't have immediate plans to buy a house/property, that WILL probably be a decision to be made in 5 years or so. Same with kids. Don't have any, but need to start planning for them. How much money out of my current inflow should realistically go towards planning for that?

Any thoughts on insight on what %s your savings go, or just trains of thought, rules of thumb? Apologies if the question posed is not so clear. I feel its, just the "inflow" angle of the net worth breakdown.

Thanks,
K5

Miguelito · Post by **Miguelito** » Mon Jun 29, 2015 3:21 pm

Upper 30's couple (all approx):

Home Equity = 33%
401k's = 40%
Roth IRA's = 8%
529's = 4%
Cash = 8%
Personal property (cars, etc) = 7%

abuss368 · Post by **abuss368** » Mon Jun 29, 2015 4:17 pm

I would prefer the majority (and it is for us) to be our investment portfolio and cash. Much more so than equity in our home. Perhaps that will be cashed out someday for something smaller, healthcare costs, etc.

sharpjm · Post by **sharpjm** » Mon Jun 29, 2015 6:20 pm

You can't do a net worth breakdown without accounting for debts. So your question doesn't really apply to people that have any debt.

For example, my 403b is 200% of my net worth.

claudia · Post by **claudia** » Mon Jun 29, 2015 6:33 pm

Husband 37; Wife 35

13% - Cash
60% - Tax deferred 401k
23% - Home equity
1% - 529 plan
3% - Misc. personal properties (cars/diamond wedding ring, etc.) - 3%

Don't know what is considered ideal. I guess the older you get, the bigger portion should be in the retirement accounts and home equity??!

claudia · Post by **claudia** » Mon Jun 29, 2015 6:35 pm

@ sharpjm....."net" worth means total assets minus total liabilities. It should have taken into accounts of the debts outstanding.

22twain · Post by **22twain** » Mon Jun 29, 2015 11:46 pm

me: early 60s
spouse: mid 60s

Both still working, but on a downslope towards full retirement which will probably be complete in two years.
House is paid off.
No debt except small CC balances which are always paid off each month.

50% Tax-deferred retirement plans (403b)
20% Taxable stocks and mutual funds
25% Cash and CDs (spouse is very conservative with taxable savings)
5% House (LCOL area)

IlliniDave · Post by **IlliniDave** » Tue Jun 30, 2015 3:54 am

Tax-advantaged retirement accounts 61%
Real estate (home plus "vacation" property) 34%
Taxable investments 4%
Miscellaneous 1%

I'm 51 and have no debt. I have more tied up in real estate than I would like, but I'm planning on downsizing my residence when I retire in 1-4 years.

No idea what's ideal, but I would like to get to the point where real estate is 20% or less, and invested assets make up the lion's share of the rest.

Miguelito · Post by **Miguelito** » Tue Jun 30, 2015 6:59 am

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Miguelito · Post by **Miguelito** » Tue Jun 30, 2015 7:00 am

deleted

archii · Post by **archii** » Tue Jun 30, 2015 10:08 am

Husband 56 yrs old, retired. Wife is 47, working PT (carrying health insurance)
No debt.
Dividends and interest are about $120K annually

Current breakdown:
Taxable accts: 58%
Cash: 14%
Home and vacation property: 13%
IRA: 12%
TSP: 2%
Life Insurance 1%

Ideal would have a little more % in income producing real estate, and in our tax advantaged accounts

sharpjm · Post by **sharpjm** » Tue Jun 30, 2015 10:36 am

claudia wrote:@ sharpjm....."net" worth means total assets minus total liabilities. It should have taken into accounts of the debts outstanding.

I understand what net worth is. Let me rephrase my post by giving an example.

Assets: $1000
Liabilities: $500
Net worth: $500

Assets as a % of my net worth: 200%

claudia · Post by **claudia** » Tue Jun 30, 2015 2:34 pm

@ sharpjm...the OP is interested to know other people's net worth breakdowns. The breakdowns should be the net amount of each asset class. Here is a rough/simplified example....

50% Home equity - (FMV of a house minus mortgage balance)
30% Cash - (total cash minus outstanding credit card debts, etc.)
20% Personal/intangible property - (FMV of your car minus auto loan balance)

This is how I interpret OP's question.

sharpjm · Post by **sharpjm** » Tue Jun 30, 2015 2:52 pm

claudia wrote:@ sharpjm...the OP is interested to know other people's net worth breakdowns. The breakdowns should be the net amount of each asset class. Here is a rough/simplified example....

50% Home equity - (FMV of a house minus mortgage balance)
30% Cash - (total cash minus outstanding credit card debts, etc.)
20% Personal/intangible property - (FMV of your car minus auto loan balance)

This is how I interpret OP's question.

Again, I understand the OPs question. But not every debt has an asset to offset it. Student loans and credit card debt are prime examples. So the question doesn't really apply to people with these types of debts. You can use equity for assets like homes and cars, but there are no assets to counter student loan/credit cards.

KlangFool · Post by **KlangFool** » Tue Jun 30, 2015 2:54 pm

TS,

1) 50% Taxable A/C
50% Retirement A/C (Roth + 401K + Rollover IRA)

I do not count house that I lived in as an asset. Ditto for home equity.

2) If you retired early (forced or voluntary), you need to have sufficient money in your taxable A/C.

KlangFool

claudia · Post by **claudia** » Tue Jun 30, 2015 3:05 pm

@ sharpjm.....Go google “net worth”…hope that helps.

sharpjm · Post by **sharpjm** » Tue Jun 30, 2015 3:07 pm

claudia wrote:@ sharpjm.....Go google “net worth”…hope that helps.

No need to, I understand net worth.

Please re-read my posts if you are still confused

FS51 · Post by **FS51** » Tue Jun 30, 2015 3:28 pm

30's

401ks - 68.10%
Roths - 4.94%
Taxable - 3.50%
Cash - 8.29%
Real Estate - 14.80%
529 - 0.37% (newborn just started contributing)

Ice-9 · Post by **Ice-9** » Tue Jun 30, 2015 3:56 pm

Early 40s. Slightly different depending on what source I use for home value...

Using Zillow (lowest estimate of home value)
86% Retirement savings
4% Bank accounts
4% Savings bonds
6% Home equity

Using Remax (highest estimate of home value)
78% Retirement savings
3% Bank accounts
4% Savings bonds
15% Home equity

Nebster · Post by **Nebster** » Tue Jun 30, 2015 11:12 pm

Mid 30s, ER...

Tax-advantaged = 17%
Equities = 62%
Cash = 4%
Home = 17%
DAF = 9%

Pretty happy with this split, because

a) We need a lot of posttax to make it the thirty years to pretax accessibility (and SS, hopefully). By then, pretax will be a much larger piece of the pie. A little of that is HSA and Roth, and we may try to move some more into those buckets in the coming years.
b) We like nice homes and would have spent more if needed, but then we stumbled onto a simpler one that we liked for less. That was lucky, because I think it really improved our cushion/safety factor. Looked at another way, maybe I would have worked longer if we decided to buy something fancy.
c) We don't consider the DAF part of our NW -- legally, it is not ours anymore -- but this let us essentially endow our future giving, today, while taxes were much higher.

Annual WR is about 3.7% of the top three buckets, which are the actual "investments." I think of the home and charitable gifts as basically not on the books from that perspective.