Time value of money

Future Value & Present Value Calculator

Q: Does compounding frequency matter much?

Much less than the rate. $500,000 at 5% for 10 years grows to $814,447 compounded annually, $823,505 monthly and $824,332 daily, a spread of about 1.2%. A one-point change in the rate moves the result by roughly $150,000. Match the frequency to how the account or payment works, then concentrate on the rate.

Q: Is this the same as a compound interest calculator?

It uses the same mathematics, but it also runs backwards. A compound interest calculator projects a savings plan forward. This calculator does that and also discounts future amounts and payment streams to today, which is what you need to compare a pension with a lump sum, price an installment note, or decide how much to set aside now for a known future cost.

Put money at different dates on the same footing: see what a portfolio or rollover grows into, or what a pension, annuity or other stream of payments is worth as a single sum today.

Money at Different Dates, Compared Fairly

What the Two Modes Answer

A dollar today is worth more than a dollar in ten years, because today's dollar can be invested in the meantime. Most retirement choices set money at one date against money at another: a pension paid monthly or a lump sum now, a sum needed for a grandchild's tuition in eight years, a note from a buyer who pays for your property over time. To compare them, bring every amount to the same date.

Future Value moves money forward: what will this portfolio, rollover or series of deposits be worth on a later date? Present Value moves it back: what single sum today is equivalent to a future amount or a stream of payments? It is one equation solved in two directions.

The default case: a pension of $2,500 a month for 25 years adds up to $750,000 of checks. Discounted at 5% a year, it is worth about $427,650 as a single sum today. That is the figure to hold against a lump-sum offer, not the $750,000.

How to Fill It In

1Choose Future Value to grow a sum forward, or Present Value to price a future sum or a stream of payments today.
2Enter the lump sum, the level payment, or both. In Present Value mode, a pension or annuity goes in the periodic payment field; leave the lump sum at zero unless there is also a single payment at the end.
3Enter the annual rate. For growth, use a return you consider realistic after fees. For present value, use the return you could earn with similar safety elsewhere.
4Enter the years: how long the money grows, or how long the payments last. For a lifetime pension, try the ages at which you or your spouse might plausibly die, such as 85, 90 and 95.
5Match the compounding frequency to the payments. A monthly pension is monthly; one payment a year is annual.
6Choose Beginning of period if the first payment arrives immediately, as many pension and annuity checks do.

The Four Formulas the Calculator Uses

Future value of a lump sum: FV = PV × (1 + r/n)^n×t. $500,000 at 5% compounded annually for 10 years is 500,000 × 1.05¹⁰ = $814,447.

Present value of a lump sum: PV = FV ÷ (1 + r/n)^n×t. $100,000 needed in 10 years, at 4% compounded annually, takes $67,556 set aside today.

Future value of a series of payments: FV = PMT × [((1 + i)^N − 1) ÷ i], where i is the rate per period and N the number of payments. $2,000 a month for five years at 5% becomes $136,012.

Present value of a series of payments: PV = PMT × [(1 − (1 + i)^−N) ÷ i]. $2,500 a month for 25 years at 5% is worth $427,650 today.

If payments arrive at the start of each period (an annuity due), multiply the payment result by (1 + i). The calculator does this when you choose "Beginning of period." An annual rate is always divided by the number of periods first: 5% with monthly payments is about 0.417% a month over 300 months, not 5% over 25.

Compounding Frequency Matters Less Than the Rate

$500,000 at 5% for 10 years grows to $814,447 compounded annually, $819,308 semi-annually, $821,810 quarterly, $823,505 monthly and $824,332 daily. The spread from annual to daily is about $10,000, or 1.2%. A one-point change in the rate moves the result by roughly $150,000. Match the frequency to how the account or payment actually works and spend your attention on the rate.

Mistakes That Change the Answer

Adding up pension checks at face value and comparing the total with a lump sum
Accepting the discount rate chosen by the party making the offer
Using a stock-market return to discount a payment that is as safe as a Treasury bond
Comparing a fixed pension with an inflation-adjusted income without allowing for inflation
Treating a payment that arrives at the start of each month as if it arrived at the end
Deciding at one rate and one lifespan without checking whether the answer flips at others

Illustrative example: the people and figures below are hypothetical, not real clients. Numbers are calculated from the stated assumptions.

How Ellen Priced a $400,000 Pension Lump Sum Before Signing

$400,000 Now, or $2,400 a Month for Life?

Ellen, 63, is retiring from a manufacturer after 31 years. Her husband Tom, 66, has his own pension and Social Security, and they hold about $1.4 million in IRAs and a brokerage account. Her plan offers a single-life pension of $2,400 a month, with no cost-of-living increase and the first check at retirement, or a lump sum of $400,000 that she could roll into her IRA. The election packet calls the two "actuarially equivalent." She wanted to know at what rate, and for how long a life.

The Face-Value Comparison

25 years of checks: 300 × $2,400 = $720,000
30 years of checks: $864,000
"Either total is far more than $400,000"
Ignores that most of those checks arrive decades from now
Ignores what $400,000 could earn in the meantime

Present Value of $2,400 a Month, First Check Now

To age 88 (25 years) at 4%: $456,202; at 5%: $412,255; at 6%: $374,359
To age 93 (30 years) at 4%: $504,383; at 5%: $448,939; at 6%: $402,301
Monthly compounding, beginning of period (annuity due)

What the Calculator Showed

1. The offer assumed a rate she could not lock in

If Ellen lives to 88, the $400,000 matches the pension only if she earns about 5.3% a year on it; if she lives to 93, about 6.1%. Those are rates a balanced portfolio might earn with some risk, not rates she could guarantee with Treasuries.

2. Longevity decided more than the rate

At 5%, the pension is worth more than the lump sum once she collects for about 23 and a half years, to roughly 87. At 4%, the break-even comes after about 20 years, at 83. Ellen is in good health, and her mother lived to 94.

3. The lump sum still had a case

A single-life pension stops at her death and pays Tom nothing; the rolled-over $400,000 would pass to him or to their children. With Tom's pension and Social Security covering their core bills, that mattered. So did the pension's lack of inflation protection: at 3% inflation, $2,400 in 20 years buys what about $1,329 buys today.

Her Decision

Ellen asked the plan for the joint-and-survivor option and its lump-sum equivalent before deciding, and ran both at 4%, 5% and 6%. The numbers did not make the choice for her. They replaced "actuarially equivalent" with a clear statement: take the pension if she expects a long life and values a guaranteed check; take the lump sum if leaving money to Tom and the children matters more and she is comfortable investing it. The pension lump sum vs. annuity guide covers the rest of that decision.

How Does the Calculator Move Money Across Time?

By compounding forward or discounting back at the rate you choose. Future Value takes a sum today, plus any level deposit each period, and shows what it becomes. Present Value takes a sum due later, plus any level payment each period, and shows the single amount today that is worth the same. Both use the standard time-value-of-money formulas that financial calculators and spreadsheets use, so the results match Excel's FV and PV functions.

Future Value = Amount × (1 + r/n)^n×t

Present Value of Payments = Payment × [1 − (1 + r/n)^−n×t] ÷ (r/n)

The calculator opens on two cases a reader in their sixties is likely to meet. In Future Value mode, a $500,000 rollover or portfolio earning 5% a year, compounded monthly, grows to $823,505 in 10 years; $323,505 of that is growth. In Present Value mode, a pension of $2,500 a month for 25 years (roughly age 65 to 90) is worth $427,650 as a single sum at a 5% discount rate, although the checks add up to $750,000. The rate table under each result shows the same inputs at other rates, which is where most of the insight is.

How Do You Value a Pension or Annuity as One Sum?

Discount every expected payment back to today and add them up. That is exactly what a pension plan does when it offers a lump sum in place of monthly checks, and it is why the offer can look small next to the total of the checks. The plan's arithmetic is not the question; its assumptions are.

Defined benefit plans calculate the minimum lump sum using interest rates the IRS publishes each month, the minimum present value segment rates under section 417(e) of the tax code (IRS). The mathematics in this calculator shows the consequence: when those rates rise, the present value of the same pension falls, so lump-sum offers shrink; when rates fall, offers grow. Plans update the rate they use on a schedule set in the plan document, so if rates have moved, ask when yours next resets.

A lifetime pension has no fixed term, so test several. Enter the monthly amount as the periodic payment, choose Beginning of period if the first check comes at retirement, and run the years to age 85, 90 and 95. If the lump sum beats the pension only when you die early, the pension is buying you insurance against a long life. If the lump sum wins even at 95, the plan's rate is generous. The pension lump sum vs. annuity guide covers the other half of the decision: survivor benefits, the plan's funding and your health.

The same method prices a commercial annuity, a structured settlement, or an installment note you receive after selling a business or a rental property to a buyer who pays over time. In each case the question is the same: what single sum, invested at a rate I trust, would give me the same money?

What Discount Rate Should a Retiree Use?

The return you could earn elsewhere with similar safety. The rate carries most of the decision: the default pension stream is worth $527,191 at 3%, $427,650 at 5% and $323,911 at 8%. Match the rate to how certain the payment is.

Choosing a discount rate by how safe the payment is
Payment	Compare it with	Why
Pension from a well-funded plan, fixed annuity from a strong insurer	High-quality bond or Treasury yield for a similar term	The payment is close to certain, like a bond's coupons
Installment note from a buyer, settlement from a private payer	A higher rate than bonds	The payer can default; the extra rate prices that risk
A sum you would invest in a diversified portfolio	A realistic long-run portfolio return after fees	Only if you would really hold it through declines

Two cautions. The party buying your future payments, whether a plan sponsor or a firm offering cash for an annuity, picks a rate that suits it; recompute at your own. And a rate borrowed from the stock market makes a guaranteed pension look cheap because it credits you with a return you would have to take risk to earn. Run the calculator at a rate one point below and one point above your choice, and decide only when the answer holds across the range.

How Does Inflation Change the Answer?

It lowers the real value of every fixed payment, year after year. At 3% inflation, a fixed $2,500 monthly pension buys what about $1,384 buys today after 20 years and about $1,194 after 25. Many private-sector pensions and most fixed annuities pay the same dollar amount for life, so the later checks in the calculator's total are worth far less than the first.

Keep nominal and real numbers apart. The calculator works in whatever terms you give it: a nominal rate for fixed payments, or a real rate (roughly the nominal rate minus inflation) for payments that rise with prices, such as Social Security or a pension with a full cost-of-living adjustment. With 5% nominal and 3% inflation, the real rate is about 2%. At that rate, $2,500 a month for 25 years that keeps pace with prices is worth $589,825 in today's dollars, against $427,650 for the same starting check fixed. That gap is the value of inflation protection, and it is one reason delaying Social Security, which is adjusted every year, is worth considering; see when to claim Social Security. The inflation calculator shows the erosion year by year.

Where Else Does This Help in Retirement?

Funding a known cost. A grandchild starts college in 10 years and you want $100,000 ready. At 4% compounded annually, $67,556 set aside today will get there. Present Value mode, with the future amount and no payment, gives the figure.
Giving now or later. $50,000 given to a grandchild today and invested at 6% is $160,357 in 20 years. Kept, the same growth happens in your account instead, so the real questions are who benefits from it, and how it is taxed along the way. The guide to gifting to children and grandchildren covers the tax rules.
Seeing where a traditional IRA is heading. $1,000,000 growing at 5% for eight years becomes $1,477,455 before required distributions begin (at 73, or 75 if born in 1960 or later), and a larger balance means larger taxable distributions. That projection is the starting point for Roth conversions before RMDs.
Pricing an installment sale. A buyer offering $2,000 a month for 10 years for a property or practice is offering the present value of that stream at the rate that reflects the buyer's credit, not $240,000.
Pre-paying or deferring a large expense. A discount for paying several years of care, insurance or membership fees up front is worth taking only if it beats the present value of paying as you go at your own rate.

What Does the Calculation Leave Out?

Taxes. Pension checks and traditional IRA withdrawals are taxable as received. A lump sum rolled directly into an IRA stays tax-deferred; if the plan pays it to you instead, it generally withholds 20%, and you have 60 days to roll the full amount over, replacing the withheld tax from other money (IRS). Ask for a direct rollover.
How long you live. The calculator uses a fixed term. A lifetime pension pays for as long as you live, and a survivor option pays after that; test several terms rather than one.
Who stands behind the payment. A present value assumes every payment arrives. The weaker the payer, the higher the rate you should use.
Fees and returns that vary. Rates are steady in the calculator. Real portfolios fluctuate and charge fees, so use a rate net of costs and treat the result as a central estimate.
Withdrawals. Future Value mode adds deposits but does not subtract withdrawals. For a portfolio you are drawing on, use the retirement withdrawal calculator.

Learn more: Read our comprehensive guide on

Pension Lump Sum vs. Annuity: How to Evaluate a Buyout Offer

How plans set lump sums, how to compare them with monthly checks, and when survivor benefits and plan funding tip the choice.

How this calculator works

Method and assumptions

Future value of a lump sum uses FV = PV × (1 + r/n)^(n×t), where r is the annual rate, n the compounding periods a year and t the years.
A regular contribution is added once per compounding period (monthly compounding means a monthly amount) and grows as an annuity: PMT × [((1 + i)^N − 1) ÷ i], with i = r/n and N = n×t. Choosing "beginning of period" multiplies that by (1 + i).
Present value runs the same math in reverse: a future lump sum is divided by (1 + r/n)^(n×t), and a level payment stream is valued as PMT × [(1 − (1 + i)^−N) ÷ i].
The rate is fixed for the whole term. The rate tables simply rerun the same formulas at other rates.

What it leaves out

Results are before tax and in nominal dollars. To see a result in today's purchasing power, use a rate net of inflation.
A pension or annuity is valued as a level payment for a fixed term. Cost-of-living increases, survivor benefits and life expectancy are not modeled, so the present value is not an actuarial lump-sum offer.
Withdrawals are not modeled: contributions and payments must be zero or positive, and a negative amount is treated as zero everywhere on the page.
Fees, contribution limits and required minimum distributions are not applied.

Sources

Methodology reviewed October 21, 2026 · For education, not individual advice

Future and Present Value FAQs

What is future value?

Future value is what a sum today will be worth on a later date at a given rate of return. $500,000 earning 5% compounded monthly becomes $823,505 in 10 years. The formula is FV = PV × (1 + r/n)^(n×t), where r is the annual rate, n the compounding periods per year and t the number of years. Add a level deposit each period and the calculator adds the future value of that series too.

How do I value a pension as a lump sum?

Discount each future check back to today and add them up; that total is the present value. A pension of $2,500 a month for 25 years is worth $427,650 today at a 5% discount rate, $473,631 at 4% and $388,017 at 6%. Enter the monthly amount as the periodic payment in Present Value mode, set the years to a lifespan you consider plausible, and compare the result with the lump sum on offer. Run it for two or three lifespans, because a lifetime pension has no fixed end date.

What discount rate should a retiree use?

Use the return you could earn elsewhere with similar safety. A pension or annuity from a sound payer is close to a bond, so a high-quality bond or Treasury yield for a similar term is the fair comparison. A stock-market return is only appropriate for money you would actually invest in stocks and could leave there through a decline. A higher rate always makes future payments worth less today, so check whether your decision holds at a rate one point lower and one point higher.

How does inflation affect present value?

A fixed payment loses buying power every year, so its value in today's dollars is lower than its value in nominal dollars. At 3% inflation, a fixed $2,500 monthly pension buys what about $1,384 buys today after 20 years. To compare a fixed pension with an inflation-adjusted one, discount the adjusted pension at a real rate (the nominal rate minus inflation): $2,500 a month for 25 years at a 2% real rate is worth $589,825, against $427,650 for the fixed pension at 5%.

Does compounding frequency matter much?

Much less than the rate. $500,000 at 5% for 10 years grows to $814,447 compounded annually, $823,505 monthly and $824,332 daily, a spread of about 1.2%. A one-point change in the rate moves the result by roughly $150,000. Match the frequency to how the account or payment works, then concentrate on the rate.

What is an annuity due?

A series of payments made at the start of each period rather than the end. Many pension and annuity checks begin the month you retire, which makes them an annuity due. Each payment arrives one period sooner, so the stream is worth exactly one period of interest more: $2,500 a month for 25 years at 5% is worth $429,432 as an annuity due against $427,650 as an ordinary annuity. Choose "Beginning of period" in the calculator to model it.

Is this the same as a compound interest calculator?

It uses the same mathematics, but it also runs backwards. A compound interest calculator projects a savings plan forward. This calculator does that and also discounts future amounts and payment streams to today, which is what you need to compare a pension with a lump sum, price an installment note, or decide how much to set aside now for a known future cost.

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