However, you may take out a loan (perhaps with no collateral, or collateralized by something else) and pay back that loan over time with your incoming SS money.
It has no direct secondary market value (ie. you cannot sell it) but neither can you sell treasury savings bonds.
Yet both have value.
There are probably other reasons, but two big reasons that one computes a net worth - and may want to consider an equivalent value for the SS - are (a) estimating risks and determining an asset allocation strategy; and (b) figuring out how close one is to having saved for a goal (ie. retirement).
In the former case, the PV of one's SS may be considered very conservative assets - more akin to TIPs or cash than even bonds. The steady income from SS ofsets some of the volatility that one gets from other asset classes.
In the latter case, folks often start by saying "I need $x to live on. So I need $x times 25 (or whatever) in order to have a nest egg which will throw off $x each year". For that computation, one might reasonably either say he needs $x - annual-SS-income -- or one might stick with $x to begin with and add the PV of SS when checking against the ($x time 25).
Either way, SS has a substantial value and should, in most cases, be considered at least partially, when looking at one's portfolio and income and savings goals.
The further away from retirement one is, however, the more I'd discount the value. A 30 yr old who gets his statement from SS saying he's going to be collecting $2000/mo after he turns 67 - while I' wouldn't tell him that he's not going to get anything, inasmuch as it's
37 years away, he might as well, at least for the moment, not worry about including it in his calculations - that $2000/mo was generated by SS based on a projection that he's going to keep earning as he is now for the next 30+ years. Big assumption and too far out to put much weight onto.Have something to add? Share your thoughts — no account required.
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