UnThreaded | Threaded | Whole Thread (14) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: DragonTales Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75531  
Subject: Need Present value (?) calculation help Date: 1/14/2013 9:01 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
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
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (14) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement