Dollars vs. Today's Dollars in Pension and Annuities tab

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Specifying D or TD in Pension and Annuities tab has no effect on annual payout of pension. The pension shows a 3% decline per year in both cases. How do I get this to report correctly?

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Dan Royer's picture

The D or TD will impact the amount it shows in a future year--but set to 100% if you want it to fully keep pace with inflation, 50% if you want it to track inflation at half, etc.

There are other fields that offer a choice between Today's Dollars or Dollars (Special Expenditures is one). What is the definition of "Today's Dollars" and what is the definition of "Dollars" in this context?

Dan Royer's picture

Today's dollars always refers to dollars denominated in the dollars of the current year--2015 as I type now. "Dollars" is referring to the nominal amount, not the inflation-adjusted amount. So if inflation is at 3% then next year if you had a special receipt of $100 it would want to know if you want that amount denominated in 2015 dollars--in which case you'd enter it as today's dollars, and you'd see it enter as $103. But perhaps it's just somebody that owes you $100 and they said they'd pay you next year. Since there was no discussion about interest or adjusting for inflation, you'd simply get paid in "dollars" which means when you put that in it would show up as $97 in "today's dollars" which is the same as $100 in 2016.

Or say I have a friend that is paying child support of 10K per year for the next 5 years. The court didn't tell him he has to adjust for inflation each year, so he's simply paying in "dollars" and when we enter it in "dollars" we see that the $10K is actually getting easier to pay each year, cheaper, because he is paying off with cheaper dollars each year--much like a mortgage.

If you are going to put in a special expense for a new furnace in 5 years. Say that would cost you $3000 today. So should you enter it as a $3K expense in dollars or today's dollars for five years from now? I'd enter it in today's dollars because I want to assume that the price of that furnace is going to go up with inflation each year. On the other hand, I guess I could say to myself--hey, I'm going to put these three $1000 bills in this jar and get them out in 5 years and I'm going to buy what I can buy with them in five years. In that case, I'd enter it as "dollars."