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 SavingsThe 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 BenefitExample 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 SaleExample 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 PropertyThis 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 BenefitExample 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.SummaryPresent
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.
