It sounds like Kitces is saying that Social Security is similar to a government TIPS bond that will start paying in the future. I don't include it in my asset allocation, but I think I will add the NPV of my SS to calculate an "including SS" asset allocation...it will make me feel better about the money I've been losing in equities, hehe!
Originally Posted by hnzw_rui
Given I can't rebalance between SS/pension and my portfolio and there are age restrictions to when you can access those funds, instead of using NPV of SS/pension, I just reduce expenditures by the expected SS/pension benefit (adjusted by some safety factor). My planned WR is then based on that reduced amount.
I agree that you can't reduce the fraction of your assets that Social Security creates. If you buy Kitces idea that SS is like a TIPS bond, it would be part of your current asset allocation calculation and you could reduce your current bond holdings to a certain point, anyway.
The idea of reducing the spending in your model by the amount you receive as Social Security sounds like it will work. For me, having a model where expenses suddenly stepped-down seems kind of weird. But it's one way to model it, I suppose.