how would you account for these assets?

[Big_Hitter]

Quote:

Originally Posted by pb4uski probably, but we repeat frequently as some members were either not around for that thread or didn't see it or weren't paying attention... as Mick Mulvaney would say... get over it.

it's just discounting uncertain cash flows - how difficult is that?

some people do that for a living

[pb4uski]

Because you don't know whether you would live to collect it.

OTOH, it is quite measurable for a group of lives, but for a single individual there are measurement issues... like individual health.

[pb4uski]

Quote:

Originally Posted by Big_Hitter it's just discounting uncertain cash flows - how difficult is that? some people do that for a living

Yes, some people do it for a living, but they do it for a group of lives, not for an individual life. Its the difference between group moratlity and individual mortality... even a pension actuary should be able to understand that.

[Big_Hitter]

Quote:

Originally Posted by pb4uski Yes, but they do it for a group of lives, not for an individual.

sure we do - lump sum calculations are just that

for my own portfolio I value my life annuity as an asset - no biggie

[Big_Hitter]

Quote:

Originally Posted by pb4uski Because you don't know whether you would live to collect it. OTOH, it is quite measurable for a group of lives, but for a single individual there are measurement issues... like individual health.

I assign a probability of ever collecting SS, be it mortality risk or political risk

[Big_Hitter]

Quote:

Originally Posted by pb4uski Well to begin with your response is a bit left field since it has nothing to do with us repeating certain topics. Having trouble focusing today? Yes, some people do it for a living, but they do it for a group of lives, not for an individual life. Its the difference between group moratlity and individual mortality... even a pension actuary should be able to understand that.

these types of present values are also calculated when dividing a defined benefit pension upon marital breakdown on an individual basis using group mortality assumptions

yes I apologize I may be a bit unfocused - still trying to get used to not having to go to w*rk anymore

[pb4uski]

Quote:

Originally Posted by Big_Hitter wasn't there a multi page thread on including db pensions in net worth?

Quote:

Originally Posted by Big_Hitter sure we do - lump sum calculations are just that for my own portfolio I value my life annuity as an asset - no biggie

Under your construct using group mortality assumptions you would have the same value for a 50 yo male that is in great health and a 50 yo male that has been diagnosed with stage 4 cancer and has 6 months to live.... right?

Group mortality isn't refined enough to differentiate between the two situations so the value for the 50 yo male is probably understated and the value for the other 50 yo male with cancer is hugely overstated.

[Big_Hitter]

Quote:

Originally Posted by pb4uski Under your construct using group mortality assumptions you would have the same value for a 50 yo male that is in great health and a 50 yo male that has been diagnosed with stage 4 cancer and has 6 months to live.... right?

for lump sum calculations, yes, we used statutory mortality tables and generally ignore the health of the individual unless the calculations is a commuted value of a disability pension or something

that's why lump sum options introduce anti-selection risk, bigly

[Big_Hitter]

but to your point, If I had a 6 month diagnosis, the present values I may be using to value my life annuity and SS would be much different, but there would be a fairly sizable life insurance payout - should I do that 23 and me thing?

(for the record I don't count either as an "asset" since they are just planned spending offsets in my model but to each his/her own)

[mrfeh]

Quote:

Originally Posted by Big_Hitter why? SS is essentially a contributory defined benefit plan Why wouldn't I count that as an asset since I've been putting in about 12% a pay for the last 33 years?

I'm not gonna argue something that's been discussed dozens of times on this board.

If you can find me a CPA that counts SS benefits in net worth, I'll consider changing my mind.

[pb4uski]

Quote:

Originally Posted by Big_Hitter but to your point, If I had a 6 month diagnosis, the present values I may be using to value my life annuity and SS would be much different, but there would be a fairly sizable life insurance payout - should I do that 23 and me thing? (for the record I don't count either as an "asset" since they are just planned spending offsets in my model but to each his/her own)

Where would the sizeable life insurance payout come from? Not the life annuity! SS is all of $255! Not near sizeable. And most retirees don't have significant life insurance coverage. So where is this mysterious "sizable (sic) life insurance payout" coming from?

On the last part it sounds to me like you are talking out of both sides of your mouth.... but I agree with you that spending offsets is preferable.

[Big_Hitter]

Quote:

Originally Posted by pb4uski Where would the sizeable life insurance payout come from? Not the life annuity! SS is all of $255! Not near sizeable. And most retirees don't have significant life insurance coverage. So where is this mysterious "sizable (sic) life insurance payout" coming from? On the last part it sounds to me like you are talking out of both sides of your mouth.... but I agree with you that spending offsets is preferable.

I have a large paid up whole life policy - I count the cash value as an asset

Just because I don't count SS as an asset doesn't mean it isn't countable

for example, traditional qualified plan design almost ALWAYS includes an anticipated SS payout - that's why we have permitted disparity (SS offsets, etc.) in pension plans

[Big_Hitter]

Quote:

Originally Posted by mrfeh If you can find me a CPA that counts SS benefits in net worth, I'll consider changing my mind.

that would be problematic since almost none of them know how to do the calculation

CPA = Can't Pass Actuarial exams

[pb4uski]

Not true... we know how to do it... it is just that we have more important things to do so we delegate menial chores to the actuaries.

P.S. When I was working some of my best friends were some of our life actuaries... some of them called me a wanna-be actuary... I sternly said no... I have too much personality for that.

[brett]

I would not account for either. Too minor.

The pension value is probably too insignificant in the grand scheme of things to be concerned about. And less so as time moves on and the amount remains static. The studio, unless indivisible is the same. Once you have deducted the expenses-actual or nominal, the profit will probably be insignificant. Plus it is only present as long as you own the home and rent out the studio.

Why sweat the small stuff

[Big_Hitter]

Quote:

Originally Posted by pb4uski Not true... we know how to do it... it is just that we have more important things to do so we delegate it to the actuaries. P.S. When I was working some of my best friends were some of our life actuaries... some of them called me a wanna-be actuary... I sternly said no... I have too much personality for that.

LOL - I tell people you can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility

[pb4uski]

Quote:

Originally Posted by Big_Hitter LOL - I tell people you can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility

Yea.... those retirement plan actuaries are a dying breed.

[ER_Hopeful]

Quote:

Originally Posted by rk911 btw, does your pension have a lump sum option? what happens to it when you die

Yes, I can take it as a lump sum or get monthly payout starting at 65. The monthly payout can be for me only or with beneficiary for a reduced amount.

[brett]

I consider an asset something that I can sell or convert to cash. My ten year min DB payout is just about finished. Even though it has a 60 percent benefit to my spouse it cannot be turned into cash. So my view is that it is not an asset even though it has value to me.

[RunningBum]

Do whatever makes sense to you, for whatever purpose you want to use the number for. It really doesn't matter what an accountant would do, you are not going to be audited for accuracy.

If it's to calculate your withdrawal rate, either include the value or figure out how to do a future cash flow. I include the present value of both my pension and SS for this purpose. Someone told me how to do the other way but I forget exactly how, and I'm satisfied with how I'm doing it.

If you're trying to figure out your estate value, don't include either unless a survivor would get some or all of the benefit.

If you're doing it for bragging rights, I don't know because I don't total up other non-investment assets, and I keep my number private anyway. If you're comparing to others on here it's best to use a method with others, but I don't put much stock in internet polls anywhere so I'm not sure it matters much.

I don't know what to make of future possible rental income. Personally I probably wouldn't include it in case I decide not to rent it, or can't rent it. If I got rental income, I'd consider that a bonus.

If someone tells you it's wrong, well, you asked, so you can't say too much, but you can nod and do it your way, because it doesn't affect them. IMO no method is "wrong" that works for you. It may be against accounting principles, but I'm not obliged to follow those.