GAAP requires recognition of certain contingent assets under the going-concern assumption, such as corporate deferred tax assets which are contingent upon future profitability. Personal financial net worth is calculated on a liquidation basis, which is why the official guidance ignores life-contingent pensions.
Another example is the requirement that real estate be valued net of selling costs and commissions. And yet another is the requirement that tax-deferred assets, like IRAs, be valued net of tax, as if they were 100% liquidated on the statement date. IMO, this is ultra-conservative and so the result is not meaningful for my purposes. I like to think of myself+DW as a "going concern." No doubt, we will pay tax on our tax-deferred assets. But this will happen over time at a drastically lower rate than if we followed the actual liquidation-based accounting rules for net worth.
Similarly, we do count the present value of pensions in both net worth and as bond-equivalents in our asset allocation. It's not difficult to calculate at all. I think it was a member here (danmar) who convinced me of the merits of this approach. Obviously, in our withdrawal strategy and related retirement planning, the pension is just another form of income, like future SS, which reduces our need for portfolio withdrawals. That's just common sense, and not at all inconsistent with whether one includes the NPV of pensions in NW.
My point is that if you are going to measure NW, I think it should be done in a thoughtful and consistent way that uses reasonable going-concern assumptions about longevity, taxes, and probable realizability of pension assets. The limited official guidance on this topic is very dated and probably geared exclusively toward credit decisions where banks want to know how much might be recovered in a loan default scenario.
Personally, I use NW as a metric for tracking wealth over a very long period of time. In our case, NW is more meaningful than investments alone because we have money for things like rental properties moving in and out of the investment portfolio all the time. So if I looked at investments alone, it would be a very misleading picture. NW is the complete picture. Also, we know that downsizing is in our future, so part of the proceeds are included in future withdrawal plans. And yes, to the OP's point, part of the rationale for keeping the pension in NW was simple consistency with the way the lump sum had been treated for several decades while working.
is that precision would require some level of recognition since the payments would continue in the event of the death of either spouse. Once one of us are gone, it would be hard to argue to include in NW given that upon death, there would be no value.
