Value of pension in net worth calculation

[Anonymous]

Anonymous wrote:It doesn't matter what other people say. I would count your net worth as an asset that supplements your pension. Retirement is ultimately about cash flow and not net worth. Your net worth can fluctuate a lot on an annual basis, so that number doesn't really mean much.

But obviously your kids can't inherit your pension, so its value is zero for estate planning purposes.

You can name a child as survivor on some pensions. People should definitely include the value of a child's survivorship benefit as part of their estate for planning purposes because the tax authorities certainly do. Especially if you live in a state with estate taxes with lower thresholds like DC or MD. (Posted earlier on this.)

[Anonymous]

Anonymous wrote:

Anonymous wrote:It doesn't matter what other people say. I would count your net worth as an asset that supplements your pension. Retirement is ultimately about cash flow and not net worth. Your net worth can fluctuate a lot on an annual basis, so that number doesn't really mean much.

But obviously your kids can't inherit your pension, so its value is zero for estate planning purposes.

You can name a child as survivor on some pensions. People should definitely include the value of a child's survivorship benefit as part of their estate for planning purposes because the tax authorities certainly do. Especially if you live in a state with estate taxes with lower thresholds like DC or MD. (Posted earlier on this.)

No, it is not estate taxes. It becomes income taxes on a 1040. How would one even calculate it as an estate tax, as you have no idea the lifespan of the survivor to calculate the amount.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It doesn't matter what other people say. I would count your net worth as an asset that supplements your pension. Retirement is ultimately about cash flow and not net worth. Your net worth can fluctuate a lot on an annual basis, so that number doesn't really mean much.

But obviously your kids can't inherit your pension, so its value is zero for estate planning purposes.

You can name a child as survivor on some pensions. People should definitely include the value of a child's survivorship benefit as part of their estate for planning purposes because the tax authorities certainly do. Especially if you live in a state with estate taxes with lower thresholds like DC or MD. (Posted earlier on this.)

No, it is not estate taxes. It becomes income taxes on a 1040. How would one even calculate it as an estate tax, as you have no idea the lifespan of the survivor to calculate the amount.

You don't know the lifespan of the survivor, but they use annuity tables to calculate the value for the estate tax purposes.

This isn't commonly known because usually the survivor benefit goes to the spouse, who benefits from unlimited marital transfers.

But if it is a child or another beneficiary, the taxman cometh just as does for child inheritance of any other asset. If the child chooses to dissipate it by not living a long life, too bad.

[Anonymous]

Anonymous wrote:

Wife and I receive about $170k annually - local govt pension. It is inflation adjusted with survivor benefits. We don’t count it towards NW but to us it’s priceless in terms of what is provides - a peace of mind via guaranteed lifetime income security. Would never trade it for large lump sump.

Who are the survivors? Do you mean your wife?

Wife has husband as designated survivor and husband has wife. You can name anyone as a survivor beneficiary however…

[Anonymous]

We don’t consider it much, just like we don’t consider SS much, when thinking about retirement or our net worth.

We both expect to have pensions. We thought my DH would have a pension worth 150k/year and was in his dream job which he planed to retire from in about 10 years. But then, like many people, he lost that Federal job/had to switch jobs this year and will instead receive a pension worth 60k/year (but will start to collect at a younger age).

We use an app/computer program to monitor spending/savings/net worth and it doesn’t include pensions or social security so really don’t think to include them unless thinking of income in retirement.

[Anonymous]

Anonymous wrote:It doesn't matter what other people say. I would count your net worth as an asset that supplements your pension. Retirement is ultimately about cash flow and not net worth. Your net worth can fluctuate a lot on an annual basis, so that number doesn't really mean much.

But obviously your kids can't inherit your pension, so its value is zero for estate planning purposes.

Some pensions can be taken as a lump sum

[Anonymous]

Anonymous wrote:

Anonymous wrote:It doesn't matter what other people say. I would count your net worth as an asset that supplements your pension. Retirement is ultimately about cash flow and not net worth. Your net worth can fluctuate a lot on an annual basis, so that number doesn't really mean much.

But obviously your kids can't inherit your pension, so its value is zero for estate planning purposes.

Some pensions can be taken as a lump sum

Most employers would love to see you take it as a lump sum. Dumb to do so in most cases.

[Anonymous]

College financial aid (CSS profile) requires that you include the present value of your pension. I guess they believe it’s an asset.

[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.

You’re comparing apples and oranges, bullshitter. The poster before you is talking about withdrawing equal amounts of cash flow, either through a pension or a substitute asset. You are talking about a decrease in cash flow to maintain a higher asset value. In the previous response, lifestyle is maintained; in your response, lifestyle is diminished. Again, not the same.

[Anonymous]

Anonymous wrote:College financial aid (CSS profile) requires that you include the present value of your pension. I guess they believe it’s an asset.

Do they explain how to calculate that?

[Anonymous]

I don’t care if my pension is part of my nw. I enjoy it and it’s plenty to support our lifestyle until the last day. Our nw continues to grow, with no withdrawals required. As the other posted cited, peace of mind. That’s what it all about with us at this point in life.

[Anonymous]

Anonymous wrote:We don’t consider it much, just like we don’t consider SS much, when thinking about retirement or our net worth.

We both expect to have pensions. We thought my DH would have a pension worth 150k/year and was in his dream job which he planed to retire from in about 10 years. But then, like many people, he lost that Federal job/had to switch jobs this year and will instead receive a pension worth 60k/year (but will start to collect at a younger age).

We use an app/computer program to monitor spending/savings/net worth and it doesn’t include pensions or social security so really don’t think to include them unless thinking of income in retirement.

$150K? That’s really high. Federal Reserve?

Sorry he had to leave this year.

[Anonymous]

Anonymous wrote:College financial aid (CSS profile) requires that you include the present value of your pension. I guess they believe it’s an asset.

Not necessarily. The CSS requires a lot more information than the FAFSA, including the present value of your pension, but that doesn’t necessarily mean they consider it an “asset.”

[Anonymous]

If you don’t include social security in NW, then why include pension?

[Anonymous]

A private annuity is essentially a purchased pension. If I take $1 million from my IRA and convert it to a lifetime annuity, have I just lost $1 million? I don’t think so. If that were true, no one would buy an annuity. From an accounting perspective, how would the books balance if the annuity was valued at $0?