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I implore the much more astute for information concerning Social Security benefits, mainly, what is the duration, maturity, credit rating and so forth, please? My bond knowledge is limited to knowing which actor starred as James Bond, Sean or Timothy and the like.
I have read here that Social Security retirement money should be a part of the fixed income allocation, etc. Thank you.
And now , on to a much less difficult question, ” Is the inertia of a body a measure of its energy content?” ( E = MC 2 and other mundane and simple stuff) I am joking. Apologies to Albert Einstein.
Here is a comment from Mike Piper ( The Oblivious Investor) on this topic.
https://obliviousinvestor.com/how-pensions-and-social-security-affect-asset-allocation
Social Security benefits are better than a Treasury bond because they pay benefits for your lifetime, are adjusted for inflation, and have survivor benefits. But it’s pretty reasonable and routine when thinking about your asset allocation to think of that income as if it’s coming from the bond part of your retirement portfolio.
Now retired but too young for Social Security, our allocation is 66% stocks, 34% Treasurys. Once my benefit and my spouse’s benefit start, our allocation will slowly rise over the remaining years to 75/25.
There’s some controversy on whether SS should be counted as a bond. Here’s an easy to digest article on the topic from Morningstar:
https://www.morningstar.com/personal-finance/should-you-count-social-security-bond
Here’s one from Michael Kitces, who believes it should be) that may be more in the weeds than you’re asking for:
https://www.kitces.com/blog/valuing-social-security-benefits-as-an-asset-on-the-household-balance-sheet/
I seem to recall a few years ago a HD contributor writing a much simpler piece about how to do it, but don’t recall who. John Lim maybe? I did a quick search but don’t see it.
Personally, I don’t do the math to include it in asset allocation, but when I start feeling like I should have more bonds, I can think “well, there’s also Social Security.” 🙂
I have a concern with couples increasing their equity allocation because of thinking of Social Security as a bond. When one of them dies that person’s check goes away, and that doesn’t happen with bonds.
Consider your SS a wonderful, inflation-adjusted annuity. It isn’t a bond. Adjust your investment stock and bond ratio to fit your goals and risk tolerance without factoring SS into the bond portion..