Reply to Valuation of Pension for Retirement Planning

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Folks want to include the pensions in their net worth because it makes them feel richer and more able to keep up with the Joneses. It’s kind of pathetic.[/quote]

Pathetic? A little overplayed. If pensions don’t matter, why do so many get p*ssed that federal workers have them? Pensions are valuable. Pensions can be valued. Pensions are both cashflows and assets. [/quote]

They’re not assets.  You’re dead, it’s gone.  [/quote]

Calm down.

First, a pension can only have an estimated value because you don’t know how long the beneficiary will live. But other assets have uncertainties too, like stock returns are not guaranteed (whereas pension returns mostly are).

Second, a pension asset gets consumed over time, but its consumption allows other assets to grow (assuming some exist).

Assuming two people of equal age and lifespan are both ready to draw equal retirement income from their investments, there is financially no difference between someone with $3 million, half invested in stocks at 10% return and half in bonds at 5% return and someone with $1.5 million in stocks at 10% and a $1.5 million pension discounted at 5%. Both will consume the $1.5 million bond or pension portfolio (assuming that alone covered their expenses) and the $1.5 million, plus growth, stock portfolio will be the inheritance. It’s the same. [/quote]

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