Social security is arguably among the richest and robust pension programs ever created. In it’s current structure, social security provides federally guaranteed lifetime benefits for individuals, spouses, divorced spouses, widows/widowers, disabled individuals, minor children as well as child-in-care benefits.  Furthermore, since social security also provides cost of living adjustments, all these benefits are also protected from the ravages of inflation which may otherwise potentially cripple the purchasing power of retirees during what could amount to a 20-30 year retirement period.

So where does this enormously valuable “financial asset” fit in the analysis of one’s investment portfolio? Well that is a much debated topic indeed among financial planners. Some simply exclude social security entirely, treating it as an outside source of income and adopting asset allocation strategies that do not take it into account at all.

Others, however, treat social security like a bond investment given the fact that it provides regular (not to mention federally guaranteed) income the same way that fixed income securities do. Likewise, social security is also unaffected by the vagaries of the stock market.

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