PV for total consumption


Is there a PV calculation reported for total discretionary spending? For example, in the max social security product the report provides a PV of the social security payments for the strategy (and what-if). This is a convenient means to compare different strategies.

Can I simply add the values in the discretionary spending column to determine the total?


Dan Royer's picture

The report is not showing the present value total as you point out. But you certainly can compare one report to another if the numbers are the same all the way down the column. But where the numbers are not constant down the column, I don't believe you can evaluate the total value of one compared to the other without assuming a discount value and so forth needed to calculate present value. I'm not enough of a mathematician to know how to do that but others in the forum probably are. Kotlikoff would know if you'd like me to ask him.

Tom Formhals's picture

Yes, I think it would be useful to ask Professor Kotlikoff about the value of a single PV for consumption. As I point out, the max social security program provides this number. (and indeed, it uses a discount factor that I presume is based on the ROR and inflation).
thanks, Tom Formhals