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Looking for some Excel help
Old 07-23-2010, 12:56 PM   #1
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Looking for some Excel help

Hello, I'm trying to determine the present value of a part of my pension (present value of defferred annuity). I can't figure out how to account for the years I still need to work before I draw the pension.

I'm 44, will draw at 62. Paymets are $3960 a year. I'd like to assume 20 year payout, no COLA. I'd like to use int rate of current Tbill, or 3.12% as int rate.

I think I compute PV, first. But don't know how to shift that value from 18 years in the future (when I'm 62) to now. Its like I need a PV of a future lump sum but can't find the excel formula.
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Old 07-23-2010, 03:31 PM   #2
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Set up 2 PV calculations.

1. rate = .0312 nper = 20 pmt = -3960 fv = 0 type = 0/blank for ordinary annuity (pmt at end of period) or 1 for annuity due (pmt at beginning of period)

This will yield the present value of this string of payments that begins in 18 yrs (58,266).

Now discount this back to today with another PV calculation.

2. rate = .0312 nper = 18 pmt = 0 fv = -58,266 (PV from #1) type = 0

PV = 33,515

(this is all in nominal dollars, ignoring inflation)
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Old 07-23-2010, 05:32 PM   #3
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Cool, thanks. I got the same result doing it manually after working on it all afternoon!
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Old 07-23-2010, 07:08 PM   #4
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there you go!!
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