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The "Future Value" Check box
The "Future Value" Check box

When to choose the Future Value check box and why?

Michael Schwabe avatar
Written by Michael Schwabe
Updated over a week ago

Overview

Often, in reference to pensions the pension amount quoted to the client is the amount they will receive when they retire at a future age. In those situations the annual amount would be a future value. In reference to U.S Social Security insurance, statements provided by the SSA quote a present value of the future amount.

The Social Security Administration offers an online calculator that allows you to roughly calculate both present value or future value to see the difference. There are a number of assumptions involved when estimating a true future value amount, not the least of which are assumed pay increases and what future COLAs could be.

Therefore, determine if the value you are entering into the Annual Amount field in an Asset-Map or a Target-Map is the inflated dollar amount being made available at a future age or if it is the Present Value of a future amount at the future age.

Check the Future Value box if the amount you are entering is the inflated amount. Checking the Future Value box tells the system that the asset will not attain that value until some future date. 

If your answer was present value you may choose not to check the "Future Value" checkbox. On a Target-Map, if the Future Value checkbox was checked on the Asset-Map financial, COLA is calculated from the age of funding availability. If the Future Value checkbox was not checked on the financial, COLA growth is assumed from the current age of the member.

Below is a helpful comparison from the SocialSecurity.gov calculator website. 

 
 1. Notice that the same parameters for retirement have different numbers determined by whether “today’s dollars” or “inflated (future) dollars” was selected. 

 
 2. Compare Today's Dollars (top) outcome vs. Future Dollars (bottom)

Of course, it is always the responsibility of the Financial Professional to determine which value to enter, to know what impact that has on funding, and to discuss with the client what it means.


5/2022

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