Reply to What is net worth and why does it matter?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]Any suggestions for how to quickly estimate value of pensions and investment property? [/quote]

[b]If you don't have control of the pension funds and/or won't take them as a lump sum, they're not part of your net worth[/b].

Investment property is appraised. [/quote]

This may be technically true, but pensions can have an enormous impact on your financial needs and so it can be helpful to figure them in your planning (I wish I had one!).   One estimating approach I've seen is to multiply the expected annual income by 25 to mimic the opposite of the 4% withdrawal rate from a lump sum.  So if you expected an annual 40k pension that would be the equivalent in terms of producing retirement income as having 1 million in assets (though not exactly because when you die you aren't left with the principal).  Another approach is to see what it would convert to as a lump sum distribution and use that even if you're not intending to take a lump sum.  Or you can just go the most straightforward route and NOT add the pension to your net worth but reduce the income you need to draw from your net worth. [/quote]

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