Pensions and net worth!

[Deleted]

I asked in another thread and asking here...

Do you keep track of your pension value in your net worth?
If yes, how do you do it?

My company offers a pension but I am 25 and that is another 40 years down the road (knock on wood).

[Deleted]

I don't. Tracking mine would be a little like including term life insurance. If I die before I begin collecting, my beneficiary gets 2.5X my final salary regardless of how much I have contributed. (This doesn't start on day 1. I forget how long, but you start off with a $25,000 pay-out.) If I collect a single check, there is no residual balance unless I had opted for a reduced pension with survivor benefits. (We won't because of his health.)

How would you begin to track it? Mine is at least vested, but I wonder if yours is. We have a 10-year minimum before you are guaranteed a pension. Since we contribute 5% of our salary to it, I guess I could track that somehow since you can roll it over if you quit before the 10 years is up.

That sounds like too much work, though. I'm not really concerned how I look on paper, but that's because I am 57 and not 25. I know you want to see how much progress you are making. It makes you feel better as you make certain sacrifices and choices.

[Waffle]

No. I used to think I had a big fat pension - but they "took it away". I wouldn't have known how to add it into a net worth calculation, anyway.

I don't remember exactly when it happened, I think sometime when I was in my early to mid-forties, instead of working towards a healthy pension, I was "given" less than 1 year's worth of salary that I was able to roll into my 401K. I had been working for that company since I was 23 and would have qualified for "special early retirement" at 52. There weren't any 401Ks when I started working there.

I will have a tiny (approx. $400 a month) pension from the company that eventually bought them out. I don't think about that when I calculate net worth, either.

[lynnerself]

Yes we do because it has a lump sum pay out option. We use that figure in figuring our net worth, even though we may take it as a pension when the time comes.

[SVT]

*IF* you wanted to calculate a pension for your net worth, you could calculate it's value as an annuity. There are calculators that will do that.

[reader79]

I do because they send me a quarterly statement with the cash value in the account. They have stopped contributing as of June '10 (or June '09?,) but since I am fully vested that money is mine should I leave the company. I think the terms are that I can either roll all of it over into an IRA or get half the amount in cash and the rest in monthly payments. It was at $9,400 last quarter.

[Gardening Grandma]

I haven't - even though DH and I both get one. But for the purpose of calculating how much one needs to retire, it's useful.
If I consider our net worth without including our pensions, we look much poorer than we really are. Using an annuity calculator, I figured that it would cost nearly $700K if we were to purchase an annuity equivalent to ourcombined pensions.

So, no I don't include it ( but I might add a PS: est value of pensions to the NW statement)

[sapphire12]

I don't calculate the value of my pension. I save as if I won't get a pension or social security.

[phil5185]

I don't count them for NW - but SS & fixed pension are nearly the same as annuities (except for the inflation adjuster in SS). You could divide the annual payout by roughly 7% to get the value - ie, a $20,000 SS pension would count as about $300,000.

[schildi]

Feb 26, 2011 20:50:40 GMT -5 phil5185 said:

I don't count them for NW - but SS & fixed pension are nearly the same as annuities (except for the inflation adjuster in SS). You could divide the annual payout by roughly 7% to get the value - ie, a $20,000 SS pension would count as about $300,000.

Phil, but out of $300K, you could not safely withdraw $20,000 in the first year, at least not when you up the withdrawal annually by inflation. I keep on hearing 4% as a safe rate. What makes you say 7% in this case here? 4% would mean a $20K SS pension would be worth $500K. SS is adjusted by the rate of inflation, right?

[dancinmama]

I have never included DH's pension as part of our net worth, but I participated in the thread the OP mentioned and was encouraged to use an annuity calculator to determine its worth. It added a boatload of money to our net worth.

DH will start collecting the pension in the first quarter of 2012 and I will continue to receive it should anything happen to him.

[Deleted]

Feb 26, 2011 15:52:05 GMT -5 @southernsusana said:

How would you begin to track it? Mine is at least vested, but I wonder if yours is. We have a 10-year minimum before you are guaranteed a pension. Since we contribute 5% of our salary to it, I guess I could track that somehow since you can roll it over if you quit before the 10 years is up.

With my company it is vested after 5 years, been with them over 2. So about 3 more years to go to be fully vested.

[Deleted]

Feb 26, 2011 23:08:38 GMT -5 dancinmama said:

I have never included DH's pension as part of our net worth, but I participated in the thread the OP mentioned and was encouraged to use an annuity calculator to determine its worth. It added a boatload of money to our net worth.

DH will start collecting the pension in the first quarter of 2012 and I will continue to receive it should anything happen to him.

Thank you dancinmama and karma for you.
That is the way I want mine to be also, if I were to die first my wife will keep on receiving the same benefits till she passes away.

[Deleted]

With my company it is vested after 5 years, been with them over 2. So about 3 more years to go to be fully vested.

What kind of pension do you have? I know there's some variation. The terms may not be exactly right, but it's like defined contribution vs. defined benefit. I had a defined contribution when I worked at Macy's part-time.

It would make a difference in how you valued it, but I don't know how the defined contribution is paid out when you retire.

[The J]

Feb 26, 2011 16:29:34 GMT -5 SVT said:

*IF* you wanted to calculate a pension for your net worth, you could calculate it's value as an annuity. There are calculators that will do that.

This. For now, I only include the value of my contributions, because if I were to leave my employer I could take those with me.

[Deleted]

Feb 27, 2011 16:14:52 GMT -5 The J said:

Feb 26, 2011 16:29:34 GMT -5 SVT said:

*IF* you wanted to calculate a pension for your net worth, you could calculate it's value as an annuity. There are calculators that will do that.

This. For now, I only include the value of my contributions, because if I were to leave my employer I could take those with me.

Thanks J and I was thinking of the comments you made in the past on how if you were to consider changing jobs you would take into consideration your pension and still being able to retire at 55

And some Karma for you.

[The J]

Yeah -- if I were to change jobs, I would have to be able to put enough aside to retire by 55. So I would have to expect the increased retirement savings to replace the pension.

[schildi]

Feb 26, 2011 21:55:22 GMT -5 schildi said:

Feb 26, 2011 20:50:40 GMT -5 phil5185 said:

I don't count them for NW - but SS & fixed pension are nearly the same as annuities (except for the inflation adjuster in SS). You could divide the annual payout by roughly 7% to get the value - ie, a $20,000 SS pension would count as about $300,000.

Phil, but out of $300K, you could not safely withdraw $20,000 in the first year, at least not when you up the withdrawal annually by inflation. I keep on hearing 4% as a safe rate. What makes you say 7% in this case here? 4% would mean a $20K SS pension would be worth $500K. SS is adjusted by the rate of inflation, right?

Phil?

[Wisconsin Beth]

We have a website that calculates a rough estimate, based on certain parameters like length of service, type of retirement, salary, etc. Last time I ran it, it estimated that with no raises between now and the next 25 years, I'd get about $30K a year. I also get a yearly statement of what's been entered into the fund in my name, it's about $50K as I recall. But I'm in local gov't in Wisconsin and God only knows what's going to happen to my pension in the next 25 years...

All that said, DH and I usually check the "pension" box on the retirement calculators but not SS. I don't think we've ever established, what defaults those types of calculators use for pensions anyway...

[Clever Username]

Feb 27, 2011 2:44:24 GMT -5 TheHaitian said:

With my company it is vested after 5 years, been with them over 2. So about 3 more years to go to be fully vested.

Try to equate this in you mind to any other ongoign contribution sort of account.
My wife and I both have pensions.

I stopped "contributions" towards mine when they handed me my belongings in a cardboard box.

My wife stopped "contributions" towards hers when the company ceased the program.

Neither was worth crying over. Same as any other account I stop putting money into.

So note, you don't have much in there yet, only if you fill it with 30 more years of service will it be worth much.

[Deleted]

Feb 28, 2011 12:21:00 GMT -5 Clever Username said:

Feb 27, 2011 2:44:24 GMT -5 TheHaitian said:

With my company it is vested after 5 years, been with them over 2. So about 3 more years to go to be fully vested.

Try to equate this in you mind to any other ongoign contribution sort of account.
My wife and I both have pensions.

I stopped "contributions" towards mine when they handed me my belongings in a cardboard box.

My wife stopped "contributions" towards hers when the company ceased the program.

Neither was worth crying over. Same as any other account I stop putting money into.

So note, you don't have much in there yet, only if you fill it with 30 more years of service will it be worth much.

I totally understand and I am not going to lower my contributions to both 401K and ROTH because of the pension.

But it is something to keep in mind and it would be a nice addition to my retirement if I were to get it.\

Same for social security, I am not counting on it but if it's there when i retire, you can bet I will be one of the first in line the day after I retire to file for it.

[sunuva]

If you are able to determine a present value of your pension for a specific point in time then use that value. For example if you can determine a present value of your pension right now (get paid out in a lump sum or an annuity beginning today) then use that value for calculating your net worth. Or, if you can calculate the value 40 years from now (future value if referenced from today or present value 40 years from now) then use that value for calculating your net worth 40 years from now.

But, if you can't get a number / arrive at a number / or the pension plainly isn't available to you, then don't use it for arriving at net worth.

If, it isn't available to you now but will be available to you in the future, assign a risk/probability factor to your calculations regarding the future (25% probability I will have $1,000,000 40 years from now - as an example).