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- Oct 13, 2010
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In a couple of other threads there was some talk about adding future cash flows to your current assets (resulting in a number that I will not name). It's just a number that might equalize people that DO have future cash flows from those that DON'T have future cash flows.
First, you need to know how long you'll live (we can't have some people just setting it to 100 or we'll get inconsistent results). I found an actuarial calculator that's probably as good as any: How Long Will I Live? - Life Expectancy Calculator
Next, go to i-orp.com and put in your future income streams, when they start, etc. Many of us have done this before so shouldn't be an issue. Just make sure you set your life expectancy long enough (if your spouse is older, you'll need to increase it). The value of i-orp is that it 'knows' the SS rules, so should be good to get a fairly good income stream.
Just to keep it easy, I'd say leave the CPI at 2.5%. Not saying that's perfect, but it's the default.
On the results page, you can click in the table of contents "Other Sources of Income". Select that table and paste it into Excel or your favorite spreadsheet. You might need to do a "Data > Text to Columns" with space as the delimiter.
Now on the top of the data, if your current age is not on the first line, add enough zero rows so the first line IS your current age. Now on the bottom of the data, overwrite values with zeros in for years which is past your expected age of living (for both you and your spouse).
In an empty column write a formula to add the two cells (you and spouse) for each year to get a family total by year, then write a formula that uses that new column to get net present value (mine was this: =NPV(2.5%,E10:E47).
The result from the formula is the net present value of your future income streams, presuming you live to an average age and presuming the CPI is level at 2.5%. NONE of those assumptions are TRUE! But with those assumptions, one may do an apples-to-apples comparison.
First, you need to know how long you'll live (we can't have some people just setting it to 100 or we'll get inconsistent results). I found an actuarial calculator that's probably as good as any: How Long Will I Live? - Life Expectancy Calculator
Next, go to i-orp.com and put in your future income streams, when they start, etc. Many of us have done this before so shouldn't be an issue. Just make sure you set your life expectancy long enough (if your spouse is older, you'll need to increase it). The value of i-orp is that it 'knows' the SS rules, so should be good to get a fairly good income stream.
Just to keep it easy, I'd say leave the CPI at 2.5%. Not saying that's perfect, but it's the default.
On the results page, you can click in the table of contents "Other Sources of Income". Select that table and paste it into Excel or your favorite spreadsheet. You might need to do a "Data > Text to Columns" with space as the delimiter.
Now on the top of the data, if your current age is not on the first line, add enough zero rows so the first line IS your current age. Now on the bottom of the data, overwrite values with zeros in for years which is past your expected age of living (for both you and your spouse).
In an empty column write a formula to add the two cells (you and spouse) for each year to get a family total by year, then write a formula that uses that new column to get net present value (mine was this: =NPV(2.5%,E10:E47).
The result from the formula is the net present value of your future income streams, presuming you live to an average age and presuming the CPI is level at 2.5%. NONE of those assumptions are TRUE! But with those assumptions, one may do an apples-to-apples comparison.