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Pls help Asset Allocation Question

Pls help Asset Allocation Question

My brother is 51 years and his wife is 46 yrs old.

He is thinking of buying a home.

He is not sure of how much of his total wealth / net worth should be in

Stocks and Real estate

Someone told him that cash and bonds aside, real estate and Stocks ( incl stock mutual funds) should be approx 50% each

Since both stocks ( incl stock mutual funds) and real estate are more volatile, he was told to split that portion of his net wealth.. 50% each.

Pls let me know if this is generally speaking, approximately correct...because I know it is difficult to be absolutely correct in these things with so many variables.

Thanks Ava

Reply to
avacohen100
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You say 'home' implying a house to live in, not a rental property. There are guidelines for how much house one can afford, and 2-3 times one's income is the range, depending a bit on down payment and interest rates. Some would also say that the house isn't quite an investment, and shouldn't be counted as an asset toward retirement (although, in the big picture one can plan to trade down, and if you start with a house worth

3X income, once it's paid off, it may be worth 6X at retirement. A trade down can give you 2-3X in cash, not chump change.)

The attempt to include it as a percent of one's net worth it a bit odd to me. When starting out, one might buy a house and have little other savings. Over time, the retirement accounts grow and the house is paid down. At your brother's age, he should be approaching 10 times his annual income as a net worth, if he'd retire at 62 with the goal of replacing 80% of his income. If he's on track, I don't recommend he takes half his savings to buy the house. I hope that is close to an answer. JOE

Reply to
joetaxpayer

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