Retirement methodology paper
How the GlobalRPh Pension Value and Retirement Income Estimator Calculates Pension Value
A practical explanation of the cash-flow model, July 31, 2026 Treasury discount curve, 2026 inflation assumptions, mortality weighting, survivor benefits, and calculator outputs.
A pension is a contractual stream of future payments rather than a single financial asset with an immediately observable price. Estimating its economic value requires the calculator to project payments, estimate whether each payment will be payable, apply the selected cost-of-living adjustment, and discount the expected cash flow to the valuation date.
Introduction
The GlobalRPh Pension Value and Retirement Income Estimator uses a monthly cash-flow model. For every projected pension month, it determines the expected payment, weights that payment by the probability that it will be payable, applies any selected cost-of-living adjustment, and discounts the result to the valuation date.
The model also calculates the estimated value when pension payments begin, a pension multiple, an interest-rate sensitivity range, projected future income, purchasing power in 2026 dollars, and mortality-weighted cumulative payments. The calculator is self-contained: the Treasury rates, inflation assumptions, and mortality tables are embedded in the JavaScript rather than obtained through a live data connection.
Overview of the valuation framework
Project the pension payment
The annual amount is converted to monthly payments and adjusted over time according to the selected COLA structure.
Estimate whether it is payable
Mortality assumptions determine the probability that the primary beneficiary or surviving spouse is alive and eligible to receive the payment.
Apply the time value of money
The payment is discounted using a rate matched to the number of years between the valuation date and the payment date.
Add the expected values
The discounted expected monthly payments are summed through the model’s mortality horizon.
The July 31, 2026 Treasury discount curve
The calculator uses U.S. Treasury par-yield curve rates as a low-credit-risk benchmark for discounting future nominal pension payments. Treasury rates vary by maturity. A payment expected in one year is therefore not discounted at the same rate as a payment expected in 20 years.
The July 31, 2026 curve was the latest published Treasury market date available when the calculator was completed. The official table reported the following rates.1
| Maturity | Rate | Maturity | Rate |
|---|---|---|---|
| 1 month | 3.78% | 2 years | 4.28% |
| 1.5 months | 3.80% | 3 years | 4.34% |
| 2 months | 3.85% | 5 years | 4.45% |
| 3 months | 3.83% | 7 years | 4.59% |
| 4 months | 3.92% | 10 years | 4.75% |
| 6 months | 3.98% | 20 years | 5.28% |
| 1 year | 4.08% | 30 years | 5.27% |
Interpolation between maturities
Pension payments occur monthly, while Treasury rates are reported only at selected maturities. The calculator uses linear interpolation to estimate the rate for intervening payment dates. A payment due in four years, for example, uses an interpolated rate between the published three-year and five-year rates.
The first listed rate is used for periods shorter than the first maturity. The 30-year rate is held level for projected payments beyond 30 years.
Discounting each payment
After identifying the applicable maturity rate, the calculator converts it into a discount factor. A distant payment receives a smaller factor than a near-term payment and therefore contributes less to today’s estimated value.
PVt = Paymentt × DFt
The 2026 inflation assumptions
The calculator uses the intermediate economic assumptions from the 2026 Social Security Trustees Report. The reported CPI-W assumptions are 2.62% for 2026, 2.46% for 2027, and 2.40% annually beginning in 2028.2
| Calendar year | Annual assumption | Primary use |
|---|---|---|
| 2026 | 2.62% | First modeled inflation year |
| 2027 | 2.46% | Second modeled inflation year |
| 2028 and later | 2.40% | Long-term annual assumption |
Inflation is used in two separate ways. First, it can increase future pension payments when the user selects a CPI-linked COLA. Second, it converts future nominal pension income into approximate 2026 purchasing power.
Real valuen = Nominal valuen ÷ In πy is the assumed inflation rate for calendar year y.
For example, the cumulative factor over the first three modeled years is approximately:
Under those assumptions, an item costing $100 in 2026 would cost approximately $107.67 after three annual increases.
How the COLA selection changes future pension payments
No COLA
The benefit remains level in nominal dollars. Inflation does not increase the cash flows used in the present-value calculation, but it reduces their future purchasing power.
Fixed annual COLA
The pension compounds at the percentage entered by the user:
Projected CPI-linked COLA
The benefit grows according to the embedded annual inflation assumptions. Under the model, a fully CPI-linked pension preserves substantially more purchasing power because both the pension and the modeled price level rise at similar rates.
CPI-linked COLA with a cap
The annual pension adjustment is the lesser of projected CPI and the user-selected cap:
If projected CPI is 2.40% and the plan caps annual adjustments at 2%, the benefit increases by 2%. Purchasing power gradually declines because the benefit grows more slowly than the assumed cost of living.
Mortality and survivor benefits
Discounting alone is not sufficient for valuing a lifetime pension. Every projected payment is also weighted by the probability that the beneficiary will be alive and eligible to receive it. The calculator uses embedded 2026 male, female, and unisex mortality tables.3
The annual probability of death at a given age is converted to an approximate monthly survival probability:
For a single-life pension, the expected payment factor is the primary beneficiary’s modeled probability of survival. For a joint-and-survivor pension, the model also accounts for the spouse’s survival probability and the selected survivor percentage. The first version supports 50%, 75%, and 100% survivor benefits.
The core present-value calculation
For each month after the valuation date, the calculator identifies the monthly benefit, COLA factor, probability that the payment is payable, and Treasury-based discount factor. It then adds the discounted expected payments:
The projected monthly payment is:
The model continues through its mortality horizon, which extends to age 121. The sum of all monthly discounted expected payments becomes the estimated portfolio-equivalent pension value today.
How the calculator’s outputs are generated
Estimated value today
The present value of all mortality-weighted future payments, including the delay until pension commencement.
Value when payments begin
The value measured at commencement and conditional on the primary beneficiary being alive when the pension begins.
Current-value pension multiple
Estimated value today divided by the first-year annual pension.
Discount-rate sensitivity range
The value recalculated after shifting every embedded Treasury rate 0.75 percentage point higher and lower.
Future nominal pension
The annual pension after the selected COLA has been applied over time.
Purchasing power in 2026 dollars
The future nominal pension divided by cumulative modeled inflation.
Mortality-weighted cumulative payments
Expected nominal payments over selected periods after pension commencement, without discounting them to today.
Assumptions summary
A printable record of the age, timing, mortality basis, survivor option, COLA, inflation, and discount-rate assumptions used.
How the model avoids double-counting inflation
The calculator uses nominal Treasury rates to discount nominal pension payments. Inflation is used to increase payments only when a CPI-linked COLA is selected and to express future nominal income in 2026 purchasing power. The model does not simply subtract inflation from the Treasury rate inside the primary present-value formula.
This keeps the cash flows and discount rates on a consistent nominal basis. For a level pension, inflation primarily changes the purchasing-power presentation. For a CPI-linked pension, it also increases the future nominal payments included in the valuation.
Illustrative example
Consider a 60-year-old user who enters a $50,000 annual single-life pension beginning in five years, selects the male mortality basis, and chooses no COLA. Under the calculator’s current configuration, the model projects monthly payments beginning at age 65, weights each payment by modeled survival, and discounts it using the Treasury rate associated with its maturity.
The retirement-date estimate is higher than the current estimate because it is measured five years later and is conditional on pension commencement. The current value also reflects the probability of surviving to the selected start date. Because the pension has no COLA, the nominal $50,000 payment remains level while its estimated purchasing power declines over time.
Important limitations
The estimator is designed for education and retirement planning. It does not model every feature that may affect a pension’s legal, actuarial, or market value.
- It does not reproduce an individual plan’s lump-sum methodology.
- It does not include plan funding status, employer or insurer credit risk, PBGC limits, taxes, fees, or state-specific rules.
- It does not calculate additional benefit accrual from future salary or service.
- It does not model early-retirement reductions, delayed-retirement credits, temporary bridge benefits, period-certain guarantees, or pop-up provisions.
- It uses standardized mortality rather than individual medical or family-history information.
- It uses Treasury par yields as discounting proxies rather than a bootstrapped zero-coupon curve.
- Its purchasing-power estimate uses CPI-W assumptions; an individual household’s spending inflation may differ.
Conclusion
The GlobalRPh Pension Value and Retirement Income Estimator replaces a static multiplier with an individualized monthly cash-flow calculation. The July 31, 2026 Treasury curve determines how strongly each future payment is discounted. The 2026 Social Security Trustees’ inflation assumptions determine projected CPI-linked growth and allow future income to be expressed in approximate 2026 purchasing power.
Mortality and survivor assumptions estimate the probability that each payment will be made. The calculator then combines the payment amount, COLA factor, probability payable, and Treasury discount factor for each month. The resulting figure is a transparent, assumption-based estimate of the economic value of the pension rather than a guaranteed plan benefit or lump-sum entitlement.
References
- U.S. Department of the Treasury. Daily Treasury Par Yield Curve Rates. Rates for July 31, 2026.
- Social Security Administration, Office of the Chief Actuary. 2026 OASDI Trustees Report: Principal Economic Assumptions, intermediate projection.
- Internal Revenue Service. Notice 2025-40: Updated Static Mortality Tables for Defined Benefit Pension Plans for 2026.
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