Listener Questions: How Do I Account for My Pension on a Net Worth Statement?

You’ve got retirement questions; I’ve got answers. This month I’m tackling your listener questions. I’m also taking time to reflect on random thoughts I have about the retirement scene. Join me for this laid-back month with no set theme to learn the answers to questions from listeners like you. Random thoughts on the retirement scene Retirement planning is not about optimizing returns. It is about securing outcomes so that you can feel confident that you can live the life you truly want. You can accomplish anything if you can just get over yourself. Life happens in the inefficient moments. Building long-lasting relationships requires making deposits along the way. “If you don’t change direction you may end up where you are heading.” -- Lao Tzu There are quality, highly competent, and collaborative financial advisors out there. The industry is changing away from a salesy, male-centric attitude to becoming a true profession. Life changes, so it is important to stay agile. Make sure to adjust your plan accordingly so that you can adapt. Should you get more conservative with your portfolio as you enter retirement? Conventional wisdom dictates that as you approach retirement you should become more conservative with your investments. In investment speak, this means having a bigger portion of your asset allocation in bonds or fixed income than in equities. However, not every person needs to follow traditional wisdom. Rather than consider your retirement portfolio from an asset allocation standpoint, consider the time frame. In retirement planning, your time frame matters. Think about how to match your assets to your retirement liabilities or yearly expenditures. You’ll want to be more conservative with the money you need in the short term but you can let your long-term assets run wild. Listen in to hear how a bucket or pie-cake strategy can help you plan your asset allocation in retirement. How to calculate pension on a net worth statement in retirement Getting a good overall idea of your financial assets is an important part of the retirement planning process. To help you do so, you’ll want to create a net worth statement so that you can better understand where you stand financially. One recent listener asked where his pension should go on his net worth statement. The answer is nowhere. Since your net worth statement is a list of your assets and liabilities, a pension would not belong. A pension is neither an asset nor a liability, instead, it can be described as social capital. The 3 sources of income in retirement are social capital, human capital, and financial capital. A net worth statement only takes into account financial capital. Rather than include your social capital on a net worth statement, you can instead put it on a household balance sheet where it can be classified as the net present value of cash flow. You can download a household balance sheet by clicking on the resources tab at RogerWhitney.com . While you’re there check out the other resources we have available to help you get started on your retirement plan. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN RANDOM THOUGHTS [2:46] Retirement planning is about securing outcomes [6:22] Have you had a bad experience with a financial advisor? [9:07] If you don’t change direction you may end up where you are heading Q&A SEGMENT [10:26] A withdrawal rates and returns question [21:20] Should you get more conservative with investments in retirement? [27:22] How to calculate pension on a net worth statement in retirement TODAY’S SMART SPRINT SEGMENT [32:50] Go do something fun! Resources Mentioned In This Episode Tanya Nichols Andy Panko Taylor Schulte Benjamin Brandt PODCAST - Wild at Heart , Summer Recovery Plan episode Rock Retirement Club Roger’s YouTube Channel - Roger That BOOK - Rock Retirement by Roger Whitney Work with Roger Roger’s Retirement Learning Center