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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 817269  
Subject: Re: Relationship Of Non-Income Producing Assets Date: 2/6/2000 11:22 AM
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TheBadger wrote,

In a way, I am implicitly suggesting that there might be more than one test in order to retire and stay retired. Test one we regularly beat to death, e.g. somewhere between 3% & 5% of investable assets can be consumed each year and one can remain highly confident to certain of dying before becoming broke. I am suggesting that test two is some relationship between non-income producing assets & income producing assets, but I don't know where the frontier is.

Thus, I wonder if there is an obvious right answer here or a maximum we should all stay below? Is 6% okay? Well it works for me. Is 12% okay? Is 20% okay? At what percentage does the house collapse?

I agree that "non-income producing" assets will delay your retirement. (I don't own a home, so I've been able to keep my "non-income producing" assets below 1% of net worth.)

I think the best way to handle this is to remove the "non-income producing" assets from your retirement calculation. Remember, "safe" withdrawal rates are "3% to 5% of your retirement assets", not your "net worth."

The most important thing is to get a good handle on the annual cost of supporting and maintaining your "non-income producing" assets. As long as a 3% to 5% annual withdrawal from your retirement portfolio allows you to pay taxes on a big home and the maintenance costs on your BMW, you should be OK.

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