In our January 13, 2026 post, we thanked Dr. Wade Pfau for highlighting that present value calculations are the “heart and soul of retirement financial planning.” Present value is the foundation of the Funded Status framework: when you divide the present value of your household’s assets by the present value of your planned spending (your spending liabilities), you obtain a powerful metric that helps answer the central retirement question — How much can I afford to spend?
A household’s Funded Status is not just a snapshot. It is a dynamic tool for managing ongoing spending and evaluating major one‑time decisions. Monitoring this metric over time helps you determine whether your assets can continue to support the lifetime spending you want without jeopardizing long‑term financial solvency.
Many readers struggle with present value because it feels abstract. The Actuarial Financial Planner (AFP) workbook is designed to make these calculations concrete. All entries are made in the Input & Results tab, and the AFP automatically performs the present value calculations in the “PVCalcs” tab. It is important to enter items only in the Input & Results tab; the PVCalcs tab is for results, not inputs.
Below we illustrate several typical asset present value calculations. (We will cover spending liabilities in a future post.)
- Accumulated Savings
The present value of your accumulated savings is simply the sum of your current account balances.
Readers often overthink this. Accumulated savings are already in today’s dollars, so no discounting is required. For asset purposes, it doesn’t matter if these accounts are after-tax or before-tax. If your accounts total $1,000,000, then the present value of accumulated savings is $1,000,000.
- Deferred Social Security Benefit
Example entry:
Annual Amount: $40,000 Deferral Period: 5 years % Upside (or %Risky): 0%
This example entry represents a future Social Security benefit beginning five years from now, increasing annually with inflation. The AFP uses your lifetime planning period (LPP) to determine the payment duration and increases each year’s payments with assumed inflation. Under default assumptions for a 65‑year‑old male, the present value is $608,299.
This example illustrates how AFP determines the present value of a Social Security benefit with a deferred commencement date.
- Future Home Sale
Example entry:
Annual Amount: $500,000 Deferral Period: 20 years % Upside: 50%
This entry represents a net gain from selling the household home 20 years from now. Because the sale is a one‑year event, no post‑sale increase rate is needed. Under default assumptions, the present value is $141,899.
This example illustrates how the AFP discounts a large, one‑time future asset sale — and how users can classify the riskiness of that asset.
- Rental Income and Future Sale of Rental Property
This example includes two entries:
Rental Income: $20,000 per annum, increasing at 3% for 20 years % Upside: 75%
Future Sale: $400,000 in 20 years % Upside: 75%
The present value of the rental income stream is $279,885, and the present value of the future sale is $98,654.
This example shows how the AFP handles multi‑component assets: a recurring income stream plus a terminal value. These entries would either be net of expenses (including taxes) or the expenses associated with the rental property would be separately valued as spending liabilities.
- Social Security Survivor Benefit
Example entry:
Annual Amount: $23,565 Deferral Period: 29 years Payment Period: 5 years Annual Increase: 3% % Upside: 0%
This represents a survivor benefit payable to the surviving spouse for the five years between her LPP and his. Under default assumptions, the present value is $27,555.
This example demonstrates how the AFP handles contingent, time‑limited, inflation‑indexed benefits.
Summary
Present value calculations allow you to translate future income and asset flows into today’s dollars so you can evaluate them consistently. The AFP workbook automates these calculations once you enter items correctly in the Input & Results tab. In a future post, we will apply the same framework to example spending liabilities, completing the Funded Status picture.
