Is there any thread or poll where we stand

[RunningBum]

The more rigid the definition, the less useful it is in real life.

 

[COcheesehead]

Please don't take it personally.

I was just pointing out that there is often great amusement here when people start quibbling over what they want net worth to mean.

As you can see already.

Nothing personal taken. I knew what you meant and got a chuckle out of it myself. I didn't know what I was stepping into. Not the first time that has ever happened to me.

 

[COcheesehead]

The more rigid the definition, the less useful it is in real life.

See, I think it is just the opposite. The more rigid, the more useful, because everyone understands it equally as opposed to their personal definition of it.
I think what is getting lost here is that people jump to what they do with their net worth and then it becomes a discussion of the application and management of assets and no longer about a singular measure at a single point in time.

 

[COcheesehead]

Whoa there Pilgrim! I beg to disagree. Sort of.......

One's pension is an income producing "Phantom" asset. But, it is real. We just don't know how to evaluate it.


Suppose one has a pension of $1000 a month for life. The pensioner lives for 5 years and collects $60,000. So, that pension could be said to have the value of aprox $56,600 assuming it earns 3% a year, no inflation adjustments and is zeroed out after the 5 years.

OTOH, if our pensioner lives 35 more years with the same assumptions, the pension has a phantom value of over $265,000.

Just because we don't know the pension's value until death, doesn't mean it doesn't have a value, IMHO.

Perhaps an accountant can tell us what the official accounting rules say about pensions.

So should my future stock and bond dividends be included in my net worth calculation?

 

[Big_Hitter]

Pension income should be looked at as part of cash flow and not a defined asset included in net worth, unless it has a lump sum option that can be defined.

it's easy to quantify the value of a pension, happens almost every time someone with a pension gets divorced

check out section 414(p) of the internal revenue code

 

[Big_Hitter]

So should my future stock and bond dividends be included in my net worth calculation?

no, they are baked into the price of the security

 

[Big_Hitter]

Perhaps an accountant can tell us what the official accounting rules say about pensions.

check out asc715

 

[COcheesehead]

no, they are baked into the price of the security

I agree they should not be included, but they are not "baked" in over the long term, 3-6 months maybe, but the market reevaluates with every earnings release.

 

[kcowan]

What are the odds that everyone will agree on the definition of net worth?

I bet on zero!

 

[Big_Hitter]

I agree they should not be included, but they are not "baked" in over the long term, 3-6 months maybe, but the market reevaluates with every earnings release.

bond prices are directly related to the coupon payment

 

[COcheesehead]

bond prices are directly related to the coupon payment

...in relation to other factors like interest rates, credit rating, etc.

 

[madsquopper]

The more rigid the definition, the less useful it is in real life.

Depends on what personal "asset" you're talking about

 

[COcheesehead]

Depends on what personal "asset" you're talking about

I would have bet that politics somehow would have crept into this discussion way before sexual innuendo.

 

[RunningBum]

See, I think it is just the opposite. The more rigid, the more useful, because everyone understands it equally as opposed to their personal definition of it.
I think what is getting lost here is that people jump to what they do with their net worth and then it becomes a discussion of the application and management of assets and no longer about a singular measure at a single point in time.

But in my opinion you've come up with a standard definition of net worth that really doesn't have a very practical meaning other than to be able to compare things. Now we know how many oranges we each have, but I also have a lot of apples, and I happen to like apples better than oranges, so I don't really care that you have a couple more oranges than me.

 

[Meadbh]

But in my opinion you've come up with a standard definition of net worth that really doesn't have a very practical meaning other than to be able to compare things. Now we know how many oranges we each have, but I also have a lot of apples, and I happen to like apples better than oranges, so I don't really care that you have a couple more oranges than me.

Cheesehead is using the standard accounting definition.

 

[COcheesehead]

But in my opinion you've come up with a standard definition of net worth that really doesn't have a very practical meaning other than to be able to compare things. Now we know how many oranges we each have, but I also have a lot of apples, and I happen to like apples better than oranges, so I don't really care that you have a couple more oranges than me.

Bingo! I feel like we hit a breakthrough moment. If we can agree on this point, then I am happy to begin to discuss how we can all achieve the best cash flow to retire on happily ever after.

 

[Bestwifeever]

Bingo! I feel like we hit a breakthrough moment. If we can agree on this point, then I am happy to begin to discuss how we can all achieve the best cash flow to retire on happily ever after.

Like we're ever going to agree on what "retire" means....

 

[COcheesehead]

Like we're ever going to agree on what "retire" means....

True dat.

 

[ERD50]

I won't bother with all the multi-quoting, but I agree that precise definitions are a good thing. Then, what you do with that info is another matter. It's mostly a matter of context. So someone can ask about the 'net worth' of two posters here, and they might provide the same number, using the same formula assets-liabilities. But that doesn't tell us much. One may have a serious disease, not expecting to live a year, no dependents, no one they care to leave money to. The other may be 50 years old with a normal life expectancy (which means 'who knows?') and several people highly dependent upon them. And then there are pensions, COL, and a million other things.

So why ask? What can we learn? I think almost nothing. I don't get it, but it's a free country, so ask away. But I am curious as to why people are curious about such things.

Like we're ever going to agree on what "retire" means....

Yep, there's another ticking time bomb! Lots of definitions. I side step it, as DW still works because she wants to, so I don't know where I fit, and I don't care. All I know is I'm pretty happy, and far happier than when I had to be somewhere at a specific time for most of the day at least 5 days a week, doing mostly useless 'work'. Good enough for me!


-ERD50

 

[braumeister]

I only have one net. It's worth around $20 or so.

 

[Chuckanut]

So should my future stock and bond dividends be included in my net worth calculation?

Not in my opinion, but the assets that produce them should be counted..

 

[exnavynuke]

Net worth is a simple calculation: assets - liabilities. Pension income should be looked at as part of cash flow and not a defined asset included in net worth, unless it has a lump sum option that can be defined.
Should I include future dividend payments in my net worth calculation, no. See the point?

Well, dividends can be a lot less secure than some pensions. Military retirement etc are pretty well "sure things" and thus their "value" is inherent. In fact, many states consider years towards a retirement part of marital assets for just that reason (a friend's wife will get 25% of her ex-husband's retirement check for life as part of their divorce agreement for instance). If the court's count it as an asset, shouldn't we?

 

[Car-Guy]

 

[COcheesehead]

Not in my opinion, but the assets that produce them should be counted..

Sorry, didn't use the sarcastic font. I was trying to make a point.

 

[RobbieB]

Pensions are taxed as ordinary income and capitol gains and qualified dividends are favored. SS is taxed at 85% of ordinary income.

That makes investments worth more than pensions.