Current Events — HabitableZone

Current Events » in reply to re: As in the estate tax...

I agree about the homes
Larry J — (archived)

Right now, about 40-50% of my net worth is the value of my home (paid for) and other non-monitary assets. It isn't like I can get an income out of that unless I took out a reverse mortgage (not an option until you're over a certain age).

Still, if they're going to means test Social Security, I don't see how a fair test can be established if it isn't based on net worth (perhaps excluding a home) or perhaps on all income, not just taxable income. I still think a more likely scenario is for them to give the SS checks out with one hand and then tax it away with the other.

One problem with means testing based on retirement income is the definition of "rich." If someone had a retirement portfolio of a million dollars (excluding housing)*, I'll bet a lot of people would say that person is rich. Depending on the amount of risk you're willing to take, you can withdraw 4-6% of that amount the first year**. That's $40,000 to $60,000 a year (before taxes) - hardly rich by most standards, especially when you consider that long term care costs several thousand dollars per month***.

*A million dollar portfolio is not that hard to achieve over a working lifetime if one starts saving early and is disciplined.

**A recent Money magazine article discussed how much someone call safely withdraw from their portfolio the first year, with allowances for adjustments for inflation in subsequent years and with the goal of making the money last for 40 years. Most analysts use 4% as the safe value for the first withdrawl, but a recent analyst proposes a rate as high as 6.2%. However, to make that rate last 40 years, there was some very strict rules to follow. It needs more study. Perhaps a more reasonable percentage is 5%.

***When we first moved to Colorado Springs, my wife worked as a nurses aid at an upscale retirement home. The cost for a single room was $4000 per month or $6000 per month for a married couple. That was 19 years ago and you can bet that those prices are closer to the norm than for upscale retirement homes.

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