Postgres - FATAL: database files are incompatible with server

If you recently upgraded postgres to latest version, you can run the below command to upgrade your postgres data directory retaining all data:

brew postgresql-upgrade-database

The above command is taken from the output of brew info postgres

If you are looking for the nuclear option (delete all data and get a fresh database), you can do:

rm -rf /usr/local/var/postgres && initdb /usr/local/var/postgres -E utf8

and then you'll need to rake db:setup and rake db:migrate from your Rails app to get setup again.