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URL:  http://boards.fool.com/need-present-value-calculation-help-30483899.aspx

Subject:  Need Present value (?) calculation help Date:  1/14/2013  9:01 AM
Author:  DragonTales Number:  71245 of 75658

Scenario question - should he retire from the military now, or stay on active duty for another 3 years?

If he stays in another 3 years, his retirement pay would increase about $4000 / year. That payment will be indexed for inflation, say a nominal 2%. The SSA life expectancy calculator thinks he will live for 30 years after retirement.

What's the present value of that income stream? Or maybe a better question is, what lump sum would I have to have that would generate that annuity?

I think it's not necessary to consider inflation (loss of earnings power), because he would be applying that inflation to both this stream, and to the pot of money he's comparing this stream to, which is the extra earnings from getting out now and getting a job, thereby increasing his overall income (job + retirement pay).

TIA for help with that calculation (or pointing me to a calculator that incorporates all those variables). Tails
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