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What role does Social Security play in clients’ asset allocation decisions? When Morningstar asked its readers how Social Security affects their asset allocation decisions, most said they think it should be treated more as an income stream than as an asset. While some people factor the present value of Social Security in determining their portfolio's asset allocations, more people look at it as longevity insurance or a reduction in future expenses. "The purpose of my retirement investments is to generate retirement income. Social Security generates inflation-adjusted retirement income and so I reduce anticipated retirement expenses (which are also inflation-adjusted) by anticipated Social Security income payments," says an investor. Others however, view it differently. For one, Vanguard founder Jack Bogle has said that people ought to consider Social Security as an asset (akin to a fixed-income allocation), and failing to account for it can result in potentially underweighting their equity allocation.
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