Comments on: Net Worth Report #9 “Doctors Orders”

By: Joel

Joel — Mon, 07 Jun 2021 17:37:36 +0000

In reply to Greg.

Hey Greg! Great discussion and I think about this a lot. Some assets are more valuable than others, even if they seems to have the same value.

If you were going to account for tax (and things like commissions/fees for selling assets), then I would probably *deduct* the taxes from the deferred accounts vs. inflate the tax free accounts higher than their value. Make sense?

For example if you have a 100k Roth and a 100k 401k… Instead of mentally bumping up the roth 15-25%, maybe try bumping *down* the 401k instead. This will a) make sure you’re not overestimating your FI numbers and b) it’s technically more correct because deferred tax is kind of like a loan from the government. Just a thought.

I know many people do this with real estate, too. They take out 6% for sales commissions and some transaction fees because they true “cash value” is lower than just the listing price.

I guess there’s a bunch of ways to chop it up. In the end all I’m really concerned about is that the number is getting bigger and bigger over time. I like having a mix of both pre-tax and post-tax accounts so I’ll have withdrawal flexibility later in life :)

By: Joel

Joel — Sun, 06 Jun 2021 21:34:44 +0000

In reply to Impersonal Finances. Glad you admit to the dumb speculation... Most people only talk about the times they win, vs. lose :)

By: Greg

Greg — Sun, 06 Jun 2021 16:00:59 +0000

Hi! Long time reader, first time poster.
Not sure if I’m overthinking this but thought it might make for a fun discussion/debate. When calculating your Roth IRA for net worth, it looks like you simply put it’s cash value along with other accounts. Fair enough, my net worth file does the same as none of us will know what tax rates will be 20+ years into the future.

But I know $100K in a Roth isn’t the same value as $100K in a 401k/Traditional IRA with the Roth being post-tax and the other pre-tax. Same goes for the HSA which won’t be taxed in the future either. To get to some equivalency, I mentally bump my Roth/HSA up 15-20% based on income/capital gains taxes. Does that make sense? Am I missing something here?

By: Impersonal Finances

Impersonal Finances — Sun, 06 Jun 2021 08:56:44 +0000

I had never seen a dog x-ray… until now! Any net worth increase is a good net worth increase. Mine was slightly off the pace thanks to some dumb speculation that unfortunately did not include AMC! Great stuff as always!

By: Joel

Joel — Fri, 04 Jun 2021 15:49:51 +0000

In reply to freddy smidlap.

That’s great to know – I’ll add this fun fact to our posts about rollovers!

By: freddy smidlap

freddy smidlap — Fri, 04 Jun 2021 15:35:50 +0000

we hold about 9% cash in our total asset mix, but 7% of that is in a stable value fund which should gain us about 2% this year in my 401k. just a quick note for any of your readers retiring in their 50’s. if you quit your job and roll your 401k into an ira you can miss out on the “rule of 55.” that is where you are allowed to start withdrawing from a 401k if you retire in your 55th year without penalty. doesn’t apply to an ira. that’s just a fun fact.

By: Joel

Joel — Fri, 04 Jun 2021 14:00:56 +0000

In reply to Steveark.

True! Actually I re-read my post this morning and thought, “I bet there are people out there that have money market funds *intentionally*!” So yeah, it was a dumb move for me, because I made a mistake.

Love your views on risk, Steve. The goal is no longer growth when you’ve won the game :). Have a great weekend my friend!

By: Steveark

Steveark — Fri, 04 Jun 2021 13:48:01 +0000

Leaving investments in cash is only a dumb move when it is unintentional. Right now I’ve got multiple six figures sitting in cash because it’s just about the same as my bond funds and actually has less downside risk. I don’t want much more than 50% stock exposure because I don’t need the risk. I’ve already won the game so I’m playing more conservatively than younger me did when I had 100% equity exposure. You are doing an awesome job of growing your net worth!