Pretending Social Security is an annuity and calculating a base for it???

[LostDollar]

(Caveat, not an agent.)

For retirement asset allocation purposes:

If one wanted to pretend Social Security is an annuity and make some lifespan assumptions:

How would they compute a $ basis for the annuity payment in order to do asset allocation %'s with other retirement assets?

Thank you.

 

[Allen Trent]

(Caveat, not an agent.)

For retirement asset allocation purposes:

If one wanted to pretend Social Security is an annuity and make some lifespan assumptions:

How would they compute a $ basis for the annuity payment in order to do asset allocation %'s with other retirement assets?

Thank you.

Not an asset, it ends at death, so I would say it is an income, just like a pension or a part time job is. An asset is generally something that has a calculated value that can be sold or left as an inheritance. Solely my opinion, not part of my Harvard education

But other much smarter professionals than I do consider it an inflation adjusted asset that should come into play in your asset allocation assumptions. Obviously, people that meet their needed income needs from SS & pensions can have a more aggressive portfolio than someone that must generate X amount of income from a more limited portfolio

[EXTERNAL LINK] - Should You Count Social Security as a Bond?

 

[somarco]

FWIW, you would need $400k earning 6% to generate $2k in monthly income. As Allen indicated, SSA has "some" inflation protection but it is an asset that disappears at the death of the beneficiary.

Another consideration is . . . the SSA benefit is normally non-taxable which makes it even more valuable.

 

[Tahoe Ray]

(Caveat, not an agent.)

For retirement asset allocation purposes:

If one wanted to pretend Social Security is an annuity and make some lifespan assumptions:

How would they compute a $ basis for the annuity payment in order to do asset allocation %'s with other retirement assets?

Thank you.

Reverse engineer a SPIA quote. Your monthly income for life = how much you'd have to put down initially to get that amount.

You're going to get a decent idea that way.

Then assume that the whole thing is a spend down savings account, meant to be zero at life expectancy. That way, the only wrong calculation (you live a long time) is in your favor.

 

[rmhaire]

All good answers but Rednecks don't look at it like that. We used a simple formula called Gimmemydamncheck.

 

[adjusterjack]

All good answers but Rednecks don't look at it like that. We used a simple formula called Gimmemydamncheck.

I must be a Redneck because that's what I said when I signed up for Social Security at the age of 62, ignoring all the suits who warned about how much more one could get by waiting for full retirement age. I don't regret it for a minute.

 

[Deborah Armstrong]

Social Security works more like a Ponzi scheme.

 

[rmhaire]

Social Security works more like a Ponzi scheme.

Why is that?

 

[scagnt83]

It depends on the age as to what the lump sum equivalent would be needed to replace it with a SPIA.

Bobs math was pretty good in general. A 70 year old could probably get a 7% payout rate these days. Im not sure what the exact payout rate on the top spias are right now for age 70. But its all age dependent.

 

[adjusterjack]

Social Security works more like a Ponzi scheme.

Troll.