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 Question: How can I tell if my pension valuation is right? Answer: Here's how you can get a ballpark sense of whether the result you are getting from the defined-benefit pension calculator is correct. Let's assume the following facts: Pension will pay \$2,000 per month at retirement Pension will start to pay when client is age 65. Client is a male, and is 50 years old today. Discount rate is 2.5% No Cost of living adjustment (that is, no COLA), just to keep it relatively simple. A ballpark life expectancy for males is to age 83. (We are not looking at this client specifically.) This means: Annual pension is \$2,000 * 12 = \$24,000. Pension starts 15 years from now. Pension will be in pay status for 18 years. 1. Ballpark value at retirement date. In order to get a ballpark sense of the value at retirement, go to Excel or a Google Docs spreadsheet, and input the following formula: =PV(0.025,18,24000) This is asking for the present value of payments of \$2,000 per month for 18 years using a discount rate of 2.5%. This gives a value of \$344,480. The next step would be to discount this number back to the present, by multiplying by (1/(1.025)^15). If the first formula was in block A1, this formula would be: =A1*(1/(1.025)^15) You are just dividing by 1.025 to discount by 2.5% for each of the 15 years between now and the time the person turns age 65. The result this gives is \$237,852. You then compare this to the software's result. Plugging these numbers in, and using the RP-2000 table, I got a software result of \$242,292. The software is also discounting for mortality, and is doing a much more sophisticated mortality table analysis. But this gives you a ballpark. Note that the date started in plan, and separation dates affect coverture, but they do not affect the plan's value.