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For purposes of creating a personal balance sheet, how does one represent the present
value of a future defined-benefit pension? The pension, a multi-employer Taft
Hartley plan, will pay a monthly benefit upon retirement (in 17 years) calculated by
multiplying each $100 of vested contributions by a specific "benefit multiplier"
(currently 3.5% if retire at 65).
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Mopsa wrote:
> For purposes of creating a personal balance sheet, how does one represent the
present value of a future defined-benefit pension?
>
The way I did it was go to the Vanguard Annuity page. Put in the
monthly amount you think the pension will pay you for a lifetime after
retirement (or yours and your spouse's lifetimes) . They will calculate
a total $ amount you need to invest to achieve that under the various
conditions. Probably the totally wrong way to do it according to the
experts, but it satisfied me.
It surprised me that it was worth a lot more than I figured.
Chip
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Mopsa wrote:
> For purposes of creating a personal balance sheet, how does one represent the
present value of a future defined-benefit pension? The pension, a multi-employer
Taft Hartley plan, will pay a monthly benefit upon retirement (in 17 years)
calculated by multiplying each $100 of vested contributions by a specific "benefit
multiplier" (currently 3.5% if retire at 65).
>
>
How's this?
I went to http://www.immediateannuities.com and entered $1000/mo as a
monthly cash income/pension at age 65.
That would cost $148,148 today. You say this is 17 years out, right?
Using a 4% discount/year, 1.04^17= 1.95.
So each 1K/mo starting at 65 is worth about $76K today, at age 48. If
one wishes to assume a higher discount, say 5%, it drops to about $65,
and a lower discount of 3% raises the present value to nearly $90K.
Given the variable involved and the timeframe, that's not too bad a range.
Joe
www.blog.joetaxpayer.com
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"Mopsa" <m...@y...com> wrote in message
news:U_udneukIemQ2FjVnZ2dnUVZ_tLinZ2d@giganews.com..
.
> For purposes of creating a personal balance sheet, how does one represent
> the present value of a future defined-benefit pension? The pension, a
> multi-employer Taft Hartley plan, will pay a monthly benefit upon
> retirement (in 17 years) calculated by multiplying each $100 of vested
> contributions by a specific "benefit multiplier" (currently 3.5% if retire
> at 65).
>
Just out of curiosity, are these vested contributions made by your
employer(s), by you, or a combination?
Elizabeth Richardson
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Theres an annual "deflator" percentage which is used figure out NPV.
For the longest time the safest number was the 30-year treasury which
is about 4.4% now. This is a historically low number which requires
fairly high pension contributions by the company. I believe companies
successfully argued for a higher deflator based both governement and
top
rated commercial bonds, closer to 5.5%. Your pension manager should
be able to tell you their current exact deflator.
So you'd figure out your age-65 pension and divide is by 1 plus the
deflator
for each year you are under 65. For 5.5% your pension is almost half
at age 52.
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