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Hi Stoffel, and welcome aboard!

If I read you right, you are trying to determine how to value the future guaranteed payments for your wife's Teacher's Pension.

One way to do it is to discount the present value of future funds. If her pension is of the government type, I would use a low discount of say 6%. In effect, you would be treating this as a type of bond income.

For example:

If she's still working and you know that if she retired today, she would receive "x" dollars per year, then the present value would be (x/.06) I assume that the longer she works, the better the pension gets, so you'll want to update this yearly until retirement.

So if she retired today, and would receive 30,000 per year, then the present value of this future income stream would be:
30,000/.06 = 500,000

If the pension was coming from a source other than the govmt, I would discount it a bit higher, depending on the company.


Not to bring up an awkward issue, but you should both have an idea of what the income stream would be like if "something" happened to one of you. If the pensions cease because of a death, you'd want to have enough insurance to cover that lost income steam.

Sorry, didn't mean to go there, but it's just as important.

Again, welcome!

Landog
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