Social Security NPV

Because social security is cola adjusted over the years, is the NPV effectively the sum of all years collected? I'm using this to calculate total assets for portfolio asset allocation.


It sounds like you are using Monte Carlo. Is this correct?

If so, here are a few thoughts (although they don't directly answer your question):

- Are you close to starting SS, already receiving benefits, or years away? If you have the option to delay your start date, this could boost your inflation protected income, perhaps substantially.
- If your percentage of inflation protected income is high and covers your core expenses, you may be able to be more aggressive in your MC asset allocation as you are probably okay even if there is a big downturn in returns.
- However, if your percentage of inflation protected income (e.g. SS, pension, annuity with COLAs) is low and/or only covers a small amount of your core expenses, you may want to be more conservative with your asset allocation in case of adverse events.

These could help frame your asset allocation calculations somewhat.


dan royer's picture

The present value of the benefits is not simply the sum of all the years collected. You have to use a discount rate to account for the fact that money in the present is more valuable than money in the future.

The company does sell an online program that does this for you at It's $40 and you can use it for a year at that price. It will run through all the thousands of collection options (it's actually millions but that sounds like such hyperbole that I hesitate to say it but its technically true I'm told) and it determines which option has the highest present value. You can then use that strategy in your ESPlanner inputs. I guessed at my own strategy--wife file and suspend so I take spousal at full retirement age then both at age 70 and I was right per that calculator.

Just to add on this from Larry's new book "Get what's yours", if you think there is a chance you may be eligible for benefits beyond your own SS and spousal, you may find the book and Maximize My Social Security (MMSS) software very helpful. Here are the benefits it considers:

• Retirement Insurance
• Spouse’s Insurance
• Divorced Spouse’s Insurance
• Child In-Care Spouse’s Insurance
• Widow(er)’s Insurance
• Divorced Widow(er)’s Insurance
• Child’s Insurance
• Disabled Child’s Insurance
• Surviving Child’s Insurance
• Father’s and Mother’s Insurance

If you may be eligible for multiple benefits, the timing, amounts, and sequencing of potential combinations makes MMSS a powerful tool.


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