How do I indicate that a real estate property (home, marital residence) will be sold?
On the real estate property, click “more info.” At the top of the screen, answer the question to indicate that the property will be sold. Scroll down to the section on sale of the property, and enter the expected date of sale and other information.
How does the mortgage interest deduction work when the parties are separated?
It depends on whether the parties hold the asset in joint title, or whether only one party is the owner. Joint title If the parties hold the property in joint title, half of the mortgage payers’ payment counts as alimony income to the other party. The other party then also gets a mortgage interest deduction […]
Why is the pension income not correct?
There are several reasons why the income from a defined benefit pension plan that you see on the Budget Report may not be what you expect. 1. There may not have been any pension allocation between the parties. In order for the software to know how to carry the pension payments, you must specify how […]
What should I assume with respect to how long the participant will work, and when she will retire?
Let’s look at the hypothetical case of a male state trooper who has been working 10 years. Let’s say that his accrued pension benefit is $2,500 a month. If he works another 10 years, his accrued pension benefit will be $4,500 a month. He is 52 years old and seems likely to work until regular […]
What if I have an employer statement of value that differs from the pension calculation?
“Statements of value” from employers are almost always different than true actuarial pension value. They are usually lower than the true actuarial value. You can use the employer’s statement if: Otherwise, just ignore the “statement of value” from employer, and use our pension valuation. Why would the lump sum value offered by the employer be […]
What if the COLA does not start immediately?
This note explains how to value a pension where the COLA does not start immediately. Let’s say the COLA begins after 3 years. Create three pensions. For each pension, everything is “actual,” as it is for your one pension, except as follows: A: No COLA. B: Retirement age is 3 years later than actual (or […]
What if the pension payments decline or stop?
This note explains how to value a pension whose payments decrease, or decline, or stop after a set number of years. Pension payments decline You can show declining payments in the software, by creating entries for two pensions. Enter the two pensions as follows: 1. Pension A: This pension pays the benefit at the initial […]
What discount rate (interest rate) do you use in the Pension valuation?
Each month, we update the interest rate, based on the then-current rates for 20-year U.S. Treasury securities. You may enter a different interest rate simply by entering it in the “interest rate” (or “discount rate”) field. With respect to a discount rate, all you are looking for is a safe rate of return, by which […]
What do you assume to be the life expectancy, or age of death, or mortality, of the pension plan participant?
The software does not use a single life expectancy / mortality / age of death assumption. Instead, it does a much more sophisticated analysis in which the present value of each year’s payment is calculated. You can see that calculation if you scroll to the bottom of the “more info” screen for the pension, and […]
How are pension present value (valuation) and pension payments coordinated?
We show the present value as an asset and the payments as income. In doing this, we are NOT double-counting, any more than one is double counting to show a bond as an asset and the income from the bond as income. You can think of a pension as being just like a bond. Both […]