Value of pension in net worth calculation

[Anonymous]

If you have a pension, do you include the value of the vested benefit in your net worth calculation?

We are not overly conservative meaning we typically include the estimated value of our home minus existing mortgage in our calculation.

[Anonymous]

This has come up before.

The real question is, Why are you are doing a net worth calculation? If it's for legal purposes (liability, divorce, etc.), then whether to include it is a legal matter that depends on your situation.

If you're doing it for retirement or other planning purposes, the question you're trying to answer is whether you have enough income, so you want to do the opposite: Take your pension as given, then convert your assets (401k, other investments) into a cash flow.

If you're doing it for bragging purposes, sure, include it.

[Anonymous]

I don’t include pensions and SS in NW. they are cash flow matters.

[Anonymous]

My favorite site for valuing your pension:

https://andrewmarshallfinancial.com/what-is-a-pension-worth/

My sole reason for calculating net worth is for estate taxes as I live in DC, for which the estate tax threshold is much lower than the Federal one. I don't include my pension in my net worth. However, I will be assigning my survivor rights to a child rather than a spouse. At death, the value of this benefit will have to be calculated as it will become part of my estate subject to taxes. So, as far as the tax authorities are concerned, this kind of survivor benefit is indeed part of your net worth.

[Anonymous]

It's basically semantics. I guess the only reason it would matter is if you're trying to compare yourself to others.

[Anonymous]

Anonymous wrote:If you have a pension, do you include the value of the vested benefit in your net worth calculation?

We are not overly conservative meaning we typically include the estimated value of our home minus existing mortgage in our calculation.

As others pointed out, the value of assets in retirement is their ability to generate income. A pension is already doing that.

Rule of thumb, treat it like an annuity that pays the same amount as a pension. For example, if your pension is $50K/year, divide that by 6% to get it's present value ($833K). This asset will disappear or greatly diminish in value when you die.. or disappear. Haven't checked annuities lately, but if the return is 8%, change the present value accordingly. There are sites that can help with that.

[Anonymous]

I have a (small) pension at my current job that I'd basically take a payout and roll into an IRA if I leave, so I don't count that in any calculations.

I also don't count Social Security in my retirement calculations, even though I feel pretty confident I'll get at least SOME benefits (I'm about 15 years from retirement). I guess I'm inherently financially conservative but would like to be able to feel confident I have enough money saved on my own just in case.

[Anonymous]

Yes, pensions eventually die, but to the degree that they preserve withdrawals of other assets, they increase that wealth. So, yes, pensions are an asset, but their lifetime is uncertain. Of course, you can calculate a value based one’s life expectancy or you can think of its value as the growth of other assets that would have otherwise reduced to support your current living.

[Anonymous]

It is not part of your networth if your family members can’t inherit it. Unless the pension has a lump sum cash out option, no reason to include it in net worth.

[Anonymous]

Yea, valuating your pension for net worth purposes is bullshit and for strivers.

Net worth is assets minus liabilities, period.

Pensions are included only when calculating cash flow / needs in retirement.

You don't include your estimated social security in your net worth. There's no difference.

[Anonymous]

Anonymous wrote:Yes, pensions eventually die, but to the degree that they preserve withdrawals of other assets, they increase that wealth. So, yes, pensions are an asset, but their lifetime is uncertain. Of course, you can calculate a value based one’s life expectancy or you can think of its value as the growth of other assets that would have otherwise reduced to support your current living.

Bullshit. That's like saying if I spend less money in retirement than my 401k would permit it's an "asset." That's not how it works.

[Anonymous]

We don’t include our pension or Social Security in net worth.

If you are trying to figure out how much you need in retirement, start with figuring out your expected monthly spending and subtract from that your monthly pension and SS. Then determine how much you need to add from your personal retirement savings to meet your expected spend.

[Anonymous]

Anonymous wrote:If you have a pension, do you include the value of the vested benefit in your net worth calculation?

We are not overly conservative meaning we typically include the estimated value of our home minus existing mortgage in our calculation.

I do not consider pension in my net worth. I only calculate for net worth awareness and interest I suppose. I just use our real estate equity, bank accounts, 401Ks, minus all of our debts. How would you include the pension?

My financial advisor does not calculate net worth, but does use the pension for retirement planning estimating how much we will have to withdrawal from savings to after that to meet expenses. The pension is no where near close enough to live on.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Yes, pensions eventually die, but to the degree that they preserve withdrawals of other assets, they increase that wealth. So, yes, pensions are an asset, but their lifetime is uncertain. Of course, you can calculate a value based one’s life expectancy or you can think of its value as the growth of other assets that would have otherwise reduced to support your current living.

Bullshit. That's like saying if I spend less money in retirement than my 401k would permit it's an "asset." That's not how it works.

NP here....you sound bitter. I don't have a pension but I know someone who gets about $70K per year pension inflation adjusted and with survivor benefit. I see it as an asset as it pays out $$ which could be close to $2m for this person who is only aged 55. I sure wish I had it myself.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yes, pensions eventually die, but to the degree that they preserve withdrawals of other assets, they increase that wealth. So, yes, pensions are an asset, but their lifetime is uncertain. Of course, you can calculate a value based one’s life expectancy or you can think of its value as the growth of other assets that would have otherwise reduced to support your current living.

Bullshit. That's like saying if I spend less money in retirement than my 401k would permit it's an "asset." That's not how it works.

NP here....you sound bitter. I don't have a pension but I know someone who gets about $70K per year pension inflation adjusted and with survivor benefit. I see it as an asset as it pays out $$ which could be close to $2m for this person who is only aged 55. I sure wish I had it myself.

Not bitter at all. But it's not an asset for net worth purposes.