firecalc & networth of phantom asset

[riverrat]

I was playing with firecalc to try to determine the portion of my networth from a pension. I believe the common use of a 6% divisor has been traditional. So that a pension of 65,000/yr would be the equivalent of having $1,083,333.

Firecalc gives an amount of $1,651,000 a 100% chance of generating 65,000/yr and a 99.2% chance of $1,650,000 doing the same.

How might I figure the value of $65,000/yr with a 2% cola (for determining net worth)?

 

[retire@40]

If you are trying to figure out what the value of your future pension is worth today, I believe the only way to determine that is to take the net present value of all those future cash flows. If it is a life pension, you may need to figure out an estimated end point.

 

[sgeeeee]

I was playing with firecalc to try to determine the portion of my networth from a pension. I believe the common use of a 6% divisor has been traditional. So that a pension of 65,000/yr would be the equivalent of having $1,083,333.

Firecalc gives an amount of $1,651,000 a 100% chance of generating 65,000/yr and a 99.2% chance of $1,650,000 doing the same.

How might I figure the value of $65,000/yr with a 2% cola (for determining net worth)?

Hi aquatic rodent,
You can use FIRECALC to estimate the present value of your pension. Of course, like any estimate of the present value of your pension, you can also make arguments for why the estimate might not be accurate.


But if you want to do this,
1) enter the $65,000 as the initial withdrawal
2) make a guess for the starting portfolio value
3) make some guess for the payout period. If you plan to begin collecting your pension at about age 65, a 30 year period makes sense.
4) pick a stock/bond allocation that matches the risk you feel your pension represent. I would guess that this is no more than 50% stock. Some people might argue that you should assume 100% bond allocation.
5) If your pension has a COLA adjustment, you can use the PPI or CPI adjustment FIRECALC offers. If you actualy want to simulate a 2% annual COLA, then I'm not certain you can do this with FIRECALC.