Hi there. Great tool! Is there a specific area where I can calculate the PV of a defined benefit plan? Thanks
Yes, under some conditions, with many caveats, and disclaimers :), the app can give you an estimate of the commuted value of the pension. We will also provide an estimate of the transferable portion and the taxable portion. See the MoneyReadyApp eBook section 2.1.4 Defined Benefit Pensions.
Enter an INCOME, select an Income source: Defined Benefit Pension.
Fill in the form, make sure the pension start date is in the future, click Save and Continue, the fill in the next form with additional pension information, click Save and Continue.
At that point you should see a green banner with the commuted value estimate if your pension payments haven't started yet.
If your pension has already started, and you just want a present value PV estimate, then you can use the Time Value of Money TVM calculator from the left menu. It'll do a present value of an annuity calculation.
Payment amount: Enter the monthly payment you are receiving. Enter it as a negative amount since you are receiving it. If the pension is indexed with inflation you can enter the inflation rate for its growth rate, maybe a little less as that will compound monthly.
Total Number of periods: Estimate how many months until you die. Set payment frequency to monthly.
Future Value: 0
Nominal annual rate %: that’s your discount rate, so your estimate of the inflation rate. Say 2%, compounding annually.
Click PV to solve for the present value.