Its up to you to decide whether you want to or not. For me its always seemed intuitive to include guaranteed income in my asset allocation decisions. But its a choice and many people will suggest not to include it. If you'd like to hear arguments in favor of valuing SS or pensions look up the TPAW thread including this post.I'm a bit confused by this as to how to factor in future and, let's be honest, undetermined SS benefits in balancing portfolios TODAY. Or if I even should. Practically speaking, I understand the thought here but pragmatically am at a lost as to how to go about it.
Pragmatically speaking, estimate how much longer you'll work and what your PIA will be. Make a decision about when you'll plan to take benefits and what you're monthly payout will be. Then price an annuity (maybe with 3% COLA as a ballpark inflation adjustment). This will give you a NPV.
Don't be worried about getting it exact. You can also use calculators that will price a theoretical inflation-adjusted annuity--not currently available on the market. I find I usually get similar NPV of SS using a variety of methods of calculation, which to me implies that they are robust enough.
Also remember that if you think of yourself as being 60/40 in your investment portfolio then your Total portfolio (including SS, pension, whatever else) should probably be 30/70 or something. In other words using the NPV of SS isn't an explicit argument to hold more stocks.
If this all seems complicated, unintuitive, and not worth the time then don't do it.
Statistics: Posted by dorster — Wed Jul 10, 2024 10:35 am — Replies 2 — Views 290