How Should You Factor In a Pension Into Your Net Worth Statement?

How Should You Factor In a Pension Into Your Net Worth Statement?

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[kortyEdna]

My portfolio doesn’t just cater to dividend stocks. I hold $VFIAX (S&P 500 index fund) in my Roth IRA and $VTI (Total Stock Market ETF) in my taxable brokerage account. Two of my largest holdings. The individual dividend stock positions all complement the index holdings.

[diggernash]

My pension had no minimum age, so I took an early first retirement. I started collecting at age 45 and went to work at a new job paying approximately the same as my previous job. Now I reinvest the entire pension net payment amount. No lifestyle change, but over the course of 10 years I will squirrel away an additional 500, 000 to grow as my inflation hedge.

[markobasi]

As someone with a pension, you definitely need to save beyond your pension payout. Still contribute to a deferred compensation 457 or Roth IRA. 15% -25% contribution should be enough additional coverage to your pension (Depending on your spending habits).

[bradh]

You can use the reverse 4% rule to determine the value of your pension. For instance, if your pension is paying you $40, 000.00 annually, then applying the 4% rule in reverse would mean that your pension is the equivalent of having $1 mil in your retirement investment. If your pension is secure, I don't see why someone couldn't use that $1 mil in an informal net worth calculation.

[shaddiegradyorielly]

Recent state employee retiree here. My pension is 92.5 % of my highest three quarters average. Doing ok so far.

[BrokeMillionaire]

I just use the current value of my pension plan when calculating my net worth. Once I retire, of course that will change.

[xmochix]

There’s is so much to be said about pensions.
We are 100% vested. So for us it’s included in our networth statement

[philwilson]

Thanks guys- a state employee here. My pension will be roughly the same as what I draw from SS. Good information.

[brandonrunkel]

I'm glad I found this video today, was literally trying to find the answer to this question a couple days ago! Thanks Money Guy Team!

[anthonydooley]

I agree that a pension isn't an asset that is listed on a financial statement, but my wife and I are both retired military with VA disability benefits that combined pays us about $12, 000 per month. This is a promise from the U.S. Government, which is pretty strong. I would say our pension is the same as $1.2M invested that earns 10% annually.

[MrYort]

Its not apart of your net worth, but it is income. So look at it as what you would need to generate that income. So take your yearly payout X 20 and you will have your feel good number.

[orion]

I retire in 13 years 9 months with a pension that will pay 57.4% of my salary. Im planning on using my 457 to pay the 43.6% difference. Im hoping my 457 will continue to grow on its own, and will be worth more when I'm required to take the RMD at 72.

[DWilliam]

What? A NYC teachers pension is usually between $70-$85K per year with COLA increases, paid healthcare(including prescription drugs) and most put money in a 403b and yes we pay into SS too. I’m looking at 8K a month just from my pension and close to $2700 from SS at age 62.

[stevehall]

I use a 3% rule. I take my pension/3 that equal whatever 1% is, then multiply by 100 and that would be what I receive monthly. If you go with 4% then just use pension /4 then multiply by 100.

[jasonwills]

Thanks for covering this. I am aproaching 30 years as a legacy autoworker. This doesnt get covered much. I am in the beggining stages of planning for retirement. Now I want to know more about my pension system.

[edhcb]

Financial advisors love to tell the one off stories about Delta pilot’s pensions but never discuss people losing their life savings in the stock market. I wonder why? 🙄

[rmcmahon]

Thank you for covering this. I started working for a municipal government while finishing up my degree. I’ll be able to retire at 51. I’m 46 now. My husband also works for a municipal government and we’ve been including this in our retirement savings plan. Love the show!

[ff]

Thank you! I haven not been counting my pension in my Net Worth, but I definitley put it in the number I will have in Retirement starting next year. Fortunately I have enough in other savings to more than cover the difference.

Thanks agains MGS

[michaelthomas]

I retire with a pension at 60 in 13 years that covers my current monthly expenses. It has a COLA. I also max out a Roth IRA annually and contribute a small amount to a traditional 401k. Those investments should more then cover any other needs or wants. Social Security, what's left of it anyway, will be bonus.

[robertcalamusso]

SS and Pension is not listed in your Networth by Pros because They can’t get their hands on.

Thinkabout it.