This is from an article by Sue Stevens, CFA, CFP, CPA from Morningstar website. I thought it might be of interest. I have seen many different methods and opinions about this and thought the article had some good points.
Valuing Streams of Income
Because pensions and Social Security provide periodic payments, some people like to value them like the coupon payments of a bond. Here's the technical way to do that: Get any calculator with present value functions and enter the following:
* Your monthly payment is "PMT" (on the calculator)
* The number of months you expect to receive these payments is "N" (make sure you convert years to months).
* The growth rate you expect to apply to these payments is "I" (if you are using months for "N", then you'll need to convert your growth rate to months too).
* Then you hit the "PV" button to find the present value.
One word of caution: sometimes valuing streams of income like this can lead to the conclusion of placing much of the remaining investable portfolio in stocks. That may or may not be the "right" answer. If you can truly tolerate watching your nest egg go through quite volatile periods without selling at a low point, then perhaps this is the right answer for you.
For the entire article here is a link: