Posted on Jun 19, 2021
Why does the BRS calculator have present and future values?
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Why does the Brs calculator have present and future values?
Posted in these groups: 
Retirement
Retirement
Posted >1 y ago
Responses: 2
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The future value is the estimated buying power of what something will cost in the future. You are still young so you can't look back and remember picking up a pack of smokes for your mom or dad for $1.35 that would cost $7 or $8 now. That's the estimated rate of inflation when you retire.
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Let me qualify my soon to be rant with the fact I am a Chartered Financial Analyst (CFA) and spent nearly all my pre USAR civilian time in corporate finance, banking, and institutional investments.
It would help to know the context of what you want to know about Present Value verses Future Value.
The simplest is in the calculation of a fixed income security (a bond for example, or even a CD aka Cash Deposit at a bank). The Present Value (PV) is essentially the buy out price of the Future Value (FV) of a stream of cash flows. If you buy into a CD at a bank at say 5% for $100, TODAY right now that cash stream is worth $100 today right now. In a year's time the FV of that cash flow will be $105.
If someone wanted to buy your $100 CD in 6 months (I'm over simplifying here) they would have to pay you $102.50 in 6 months in order to be given the right to collect that $105 in another 6 months.
So Present Value I presume in the context of the retirement calculator is showing you the today price right now of the retirement nest egg. The Future Value will be what you are expected to have at retirement in 40+ years.
All of the calculation inputs are purely speculative. The example numbers you have in your attachments are too optimistic.
*******
As a side comment, I calculated the difference the old retirement pension verses the new blended system and how applied to my situation.
So for example, soldiers can now keep their nest egg when they leave the military prior to 20 years at the cost of a reduced pension payout. The net effect of this is about $100K-$250K (depending on various things) savings per soldier that makes it to retirement in favor to the government. The government gets the benefit of reduced investment risk and pushes that on the soldier. The soldier could potentially end up with a greater retirement cash flow if economic cycles just time out correctly with their life cycle. However, soldiers still face adverse investment risk if their portfolios tank 5 ish years before retirement.
All in all the government is not in the business of managing retirement investment risk, and put it on all the employees. So I get it.
It would help to know the context of what you want to know about Present Value verses Future Value.
The simplest is in the calculation of a fixed income security (a bond for example, or even a CD aka Cash Deposit at a bank). The Present Value (PV) is essentially the buy out price of the Future Value (FV) of a stream of cash flows. If you buy into a CD at a bank at say 5% for $100, TODAY right now that cash stream is worth $100 today right now. In a year's time the FV of that cash flow will be $105.
If someone wanted to buy your $100 CD in 6 months (I'm over simplifying here) they would have to pay you $102.50 in 6 months in order to be given the right to collect that $105 in another 6 months.
So Present Value I presume in the context of the retirement calculator is showing you the today price right now of the retirement nest egg. The Future Value will be what you are expected to have at retirement in 40+ years.
All of the calculation inputs are purely speculative. The example numbers you have in your attachments are too optimistic.
*******
As a side comment, I calculated the difference the old retirement pension verses the new blended system and how applied to my situation.
So for example, soldiers can now keep their nest egg when they leave the military prior to 20 years at the cost of a reduced pension payout. The net effect of this is about $100K-$250K (depending on various things) savings per soldier that makes it to retirement in favor to the government. The government gets the benefit of reduced investment risk and pushes that on the soldier. The soldier could potentially end up with a greater retirement cash flow if economic cycles just time out correctly with their life cycle. However, soldiers still face adverse investment risk if their portfolios tank 5 ish years before retirement.
All in all the government is not in the business of managing retirement investment risk, and put it on all the employees. So I get it.
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Cadet 2LT (Join to see)
I still don't understand why my caluclations are off its from the offical government website
so its 24m retirement is 100% way off and not realistic?
I just thought the government increases the retirement fund based on inflation but apprently not.
so its 24m retirement is 100% way off and not realistic?
I just thought the government increases the retirement fund based on inflation but apprently not.
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SFC (Join to see)
This is one of those moments where I've learned it's better to keep things as simple as possible, even though you know there are 24+ variables that can affect the value of the dollar 40 years from now. As a Commander once said to me, "I just want wave tops". You are clearly a technical expert in your field; sometimes the biggest challenge is breaking big chunks of information into fifth grade bite size chunks.
For those giant estimations on the BRS calculator, while I was briefing it to new Soldiers I was told they are based on a 7-8% average growth rate over 40 years. I'm not a financial specialist, but that sounded ambitious even to me.
For those giant estimations on the BRS calculator, while I was briefing it to new Soldiers I was told they are based on a 7-8% average growth rate over 40 years. I'm not a financial specialist, but that sounded ambitious even to me.
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CPT (Join to see)
Cadet 2LT (Join to see) - I'm sure I'll get around to checking out the calculator (but I'm on the old retirement plan so I'm generally not motivated), but just think of the logic that one becomes a strong (more than a few million) multi million heir in a public service job that is not at the top of the pecking order (even a Full COL is not at the top of the pecking order (relative to income base) of all the public service jobs out there when considering all the civilian agencies).
At the very least, the entire foundation of the calculations of you having $6M+ is based on the returns of your 401K savings part of the calculator. All other parts of it are fixed income streams like the "pension" part. The insane numbers of your retirement are all coming from your Service Member TSP portion. The Government doesn't own any part of this. You carry 100% of the risk and the entire thing could technically tank to ZERO.
There is no way Schwab is NO FEES. What is meant to be no fees?
Zero front load?
Zero back load?
Zero annual management fee?
Zero consulting fee?
Zero 12b-1 fees (marking fees)?
Zero transaction fees? Meaning you can buy their highly fee structured funds free of transaction costs.
No fee IRA account (meaning the account services are free, but the funds in the account are strapped with various fees).
Schwab is getting paid some way.
You need to read the prospectus and disclosures of each and every single fund you invest in to understand the fee structure.
You need to read the prospectus and disclosures of each and every single fund you invest in to understand the fee structure.
You need to read the prospectus and disclosures of each and every single fund you invest in to understand the fee structure.
You need to read the prospectus and disclosures of each and every single fund you invest in to understand the fee structure.
You need to read the prospectus and disclosures of each and every single fund you invest in to understand the fee structure.
Follow?
All that matters in regard to calculating your investment return is the money you put in, and the money that makes it back into your personal accounts. So in between that 10% are all those fees I mentioned plus the ups and down of the world economy.
See, that 10% is merely an INDEX calculation of the stocks in said index over a period of time. It is absent of any sort of administration costs associated with investing.
Example. I just sold my house (literally I just did in real life). I bought it for X dollars and sold it for Y dollars. So on an index the gain would be [(Y-X)/X] then annualized, but at the end of the day I paid taxes, broker fees, and it was a rental property that had management fees. So really as far as I was concerned it was (Y-X-taxes-broker-manager)/X, etc.....
Now, as an investment it was horrible, and I sold it for $150K more than I bought it. That should be good, right? But my annualized internal rate of return was 0.3% (one can get more in a savings account) over the course of my ownership. I basically got $11,000 more than I dumped into it over the years for principle payments, mortgage interest, repair costs, management fees, taxes, etc.....
I barely got all my money back.
Had I simply dumped all the money I used for my down payment on the property (and rented) I would have had $100,000 more in my pocket.
Meanwhile the INDEX return of my house was 2.15% my actual realized return that I earned on my cash flows was only 0.3%.
At the very least, the entire foundation of the calculations of you having $6M+ is based on the returns of your 401K savings part of the calculator. All other parts of it are fixed income streams like the "pension" part. The insane numbers of your retirement are all coming from your Service Member TSP portion. The Government doesn't own any part of this. You carry 100% of the risk and the entire thing could technically tank to ZERO.
There is no way Schwab is NO FEES. What is meant to be no fees?
Zero front load?
Zero back load?
Zero annual management fee?
Zero consulting fee?
Zero 12b-1 fees (marking fees)?
Zero transaction fees? Meaning you can buy their highly fee structured funds free of transaction costs.
No fee IRA account (meaning the account services are free, but the funds in the account are strapped with various fees).
Schwab is getting paid some way.
You need to read the prospectus and disclosures of each and every single fund you invest in to understand the fee structure.
You need to read the prospectus and disclosures of each and every single fund you invest in to understand the fee structure.
You need to read the prospectus and disclosures of each and every single fund you invest in to understand the fee structure.
You need to read the prospectus and disclosures of each and every single fund you invest in to understand the fee structure.
You need to read the prospectus and disclosures of each and every single fund you invest in to understand the fee structure.
Follow?
All that matters in regard to calculating your investment return is the money you put in, and the money that makes it back into your personal accounts. So in between that 10% are all those fees I mentioned plus the ups and down of the world economy.
See, that 10% is merely an INDEX calculation of the stocks in said index over a period of time. It is absent of any sort of administration costs associated with investing.
Example. I just sold my house (literally I just did in real life). I bought it for X dollars and sold it for Y dollars. So on an index the gain would be [(Y-X)/X] then annualized, but at the end of the day I paid taxes, broker fees, and it was a rental property that had management fees. So really as far as I was concerned it was (Y-X-taxes-broker-manager)/X, etc.....
Now, as an investment it was horrible, and I sold it for $150K more than I bought it. That should be good, right? But my annualized internal rate of return was 0.3% (one can get more in a savings account) over the course of my ownership. I basically got $11,000 more than I dumped into it over the years for principle payments, mortgage interest, repair costs, management fees, taxes, etc.....
I barely got all my money back.
Had I simply dumped all the money I used for my down payment on the property (and rented) I would have had $100,000 more in my pocket.
Meanwhile the INDEX return of my house was 2.15% my actual realized return that I earned on my cash flows was only 0.3%.
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Cadet 2LT (Join to see)
Thanks for the advice i'll be more careful. But i'm still unsure what the 24m future value means? Does this mean there is a .00000001% chance of me making that much? Why not 50m? i don't understand where they got that calculation from? Its not the same as the army raising the pay of Officers due to inflation?
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