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Post by retiredat48 on Sept 9, 2022 14:25:25 GMT
Seems pretty simple to me. If I have $1,542,857 invested @3.5% = $54,000 per year income. Maybe I'm wrong. Wouldn't be the first time. In a standard pension, you forfeit your income stream when you die. Perhaps the easiest way is to get a quote for an annuity for the income stream. Yes...there are lump sum value calculators our there also Of course if you are eighty years old, may need an annuity type calculation. BTW that Bogle recommended the value be included, Boglehead.org forum discussed this often and, from memory, majority favored not including these values in ones investment portfolio. BTW #2...Each year I kept a 31Dec rackup calculation of my assets/net worth...for the past 55 years. Not logarithmic. Had to scotch-tape loose leaf papers going upward to account for higher values, and more time. I did one value with home ownership...one without. Did not include SS or pension values...nor auto values...nor precious metals (that value has never been documented!). R48
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Post by steelpony10 on Sept 9, 2022 15:10:27 GMT
retiredat48 Investments that appreciate are good. I was thinking of beaters that break down when the missus is 3 hours away. Unforeseen collateral damage from being too thrifty.
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Post by mozart522 on Sept 9, 2022 22:15:08 GMT
"BTW that Bogle recommended the value be included, Boglehead.org forum discussed this often and, from memory, majority favored not including these values in ones investment portfolio"
Well the majority of folks at BH.org are not the target retirees for that advice. It was those with smaller portfolios- 100 to 300K that might benefit.
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Post by liftlock on Sept 11, 2022 16:22:53 GMT
I was told by a banker friend, a long time ago, that pensions could not be counted toward ones net worth, as it couldn't be used as security to back-up a bank loan. While I can understand that from the banks point of view, it always seemed to me that the "present value" of a pension should count toward net worth in general terms regarding how much a person would need in investments, say bonds, to produce the annual pension income. Just another point of view. That has not been my experience. When I applied for a home equity credit line a year or two ago my lender counted my Social Security and pension income their ability to repay the loan calculations.
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Post by liftlock on Sept 11, 2022 17:34:28 GMT
"BTW that Bogle recommended the value be included, Boglehead.org forum discussed this often and, from memory, majority favored not including these values in ones investment portfolio" Well the majority of folks at BH.org are not the target retirees for that advice. It was those with smaller portfolios- 100 to 300K that might benefit. I have not looked a the Boglehead.org forum on this issue but here is what I do: In the first quarter of each year I update my net worth statement spreadsheet to document my year end assets and liabilities for estate planning purposes. In my spreadsheet, I estimate the present value of my Social Security and pension income streams based on my remaining life expectancy and changes to the income streams. I do this to determine my asset allocation between sources of guaranteed income and non-guaranteed income distributions from my investment portfolio. I consider the present value of my guaranteed income sources as a non-changeable base allocation to bonds / fixed income. I compare that base amount to the value of my investment portfolio to consider how to allocate the assets within my investment portfolio. My goal is to make sure I have an adequate allocation to equities and don’t need an additional allocation to bonds. This exercise gives me comfort in allocating a greater portion of my investment portfolio to equities for growth and inflation protection. Larger allocations to guaranteed income sources allows one to take on more risk in their investment portfolio. I ignore Pension and Social Security income when I estimate how much of my investment portfolio I can afford to safely withdraw each year. I then add my investment portfolio distributions to my pension and social security income to estimate my total retirement income. The attached shows the methodology I use for calculating the present value of my pension and Social Security income streams. The illustration shows $1,000 of annual annuity income payable at age 66 for 20 years using a 3.0% nominal risk free annual investment rate.
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Post by Mustang on Sept 11, 2022 22:33:57 GMT
When they start taxing net worth we will all be trying to show that we are not in a high bracket.
If someone is retired and trying to estimate the present value of a pension I think 30 years is a bit optimistic. That would take someone age 65 to 95 when the average life expectancy is maybe 75-80. We do use that for calculating retirement withdrawals because who knows someone 65 might just beat the odds. Saying the pension will last 15 years is a lot more realistic. Since I'm 72 an average life expectancy of 80 would mean that I would calculate present value of my pension and social security using 8 years.
Some have touched on it but I'm more interested cash flow than net worth. Inflation adjusted pensions and social security already tell you the income stream from those sources. There are various methods of withdrawing income from investments. I prefer those that provide a stable income to cover needed expenses. Methods such as the 4% Rule do that. Many advisors use the inverse to say you need to save 25 times your planned withdrawal. But that really depends upon the payout period. 25 times (4% withdrawal) is for a 30 year payout. 20 times (5% withdrawal) should be used for a 20 year payout. And, 16.7 times (6% withdrawal) should be used for a 15 year payout. Historically, these have a 98% or more chance of success. (source is Wade Pfau's 2018 update of the Trinity study.)
Net worth is great but if the assets do not provide sufficient cash flow the retiree could end up selling the assets to pay the bills.
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Post by liftlock on Sept 12, 2022 3:05:36 GMT
If someone is retired and trying to estimate the present value of a pension I think 30 years is a bit optimistic. That would take someone age 65 to 95 when the average life expectancy is maybe 75-80. We do use that for calculating retirement withdrawals because who knows someone 65 might just beat the odds. Saying the pension will last 15 years is a lot more realistic. Yes, 30 years is too way too optimistic for most folks. Life Expectancy at age 65 (pre-Covid) is about 19-20 years per the CDC. Life expectancy at birth is lower. www.cdc.gov/nchs/data/hus/2017/015.pdf
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Post by Chahta on Sept 20, 2022 18:38:29 GMT
Odds keep going down everyday it seems.
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