The Motley Fool Discussion Boards Previous Page Investing/Strategies / Retirement Investing URL:  http://boards.fool.com/quoti-am-a-retired-educator-and-after-30-years-11370894.aspx Subject:  Re: Pension figured into Networth??? Date:  10/14/1999  8:58 AM Author:  BGPenhollo Number:  14517 of 88772 "I am a retired educator and after 30 years receive \$45,000 in pension. I am now working a second career, am 54, and when I figure my net worth I am not sure how to figure my pension into it. If I had invested \$700,000 and then decided to take a 6% CD on that amount I would receive approx what my pension gives me. "The most logical and probably the most complex way to figure any cash flow is through what is known as a Present value of discounted cash flows. This requires an estimate of the number of payments you will receive and when. And an estimate of the discount rate 4-6% would be a good range.If you know how to run a spread sheet or have a financial calculator this is fairly easy.***************************************************Personal Disclaimer: If anyone else is familiar with PV of DCF would they please check my math. I think I am doing this right but this is not my profession****************************************************If using a TI Financial BAII calculator the following values would be entered:Num of payments into "N"Amount of the Payment requires that the negative value goes into PMT (using Negative will yield a positive PV and using a positive value here will yield a negative PV)Discount rate needs to be adjusted if the payment are made other than yearly. If monthly payments, divide the discount rate by 12, If Quarterly, divide by 4 and this goes into I/Y. I suggest using yearly, it is easier.And since the payments end at your death, their is no money left at the end so future value - FV - is set to zero.Let's say you will be receiving this pension next yearand it will be paid on a yearly basis and let's use your 6% and assume you will receive this \$45,000/yr foranother 30 years.N=30I/Y=6PMT=-45,000FV=0CPT PV (Compute PV) = \$134,582.86When you simply divide 6% into \$45,000, you are finding the value of a discounted cash flow into infinity or what is known as a perpetual annuity or perpetuity and that is not what you have.If you or anyone has Excel and wants a simple worksheet to use, please email me asking for a simple PV worksheet calculator, and I will forward one.BGP Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us