discount rate... am I doing it right?

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LateStudent
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discount rate... am I doing it right?

Post by LateStudent »

in this post http://www.financialwisdomforum.org/for ... 0&t=118755 ("retirement, take leave as cash or time?"),

I used a discount factor it to adjust future cashflow for a pension benefit to present value.

I noted "I believe(???) the correct discount rate to use is the expected long term average nominal return of a typical retirement portfolio, which we have been assuming to be 5% (3% real return + 2% inflation)."

I've never actually felt confident of what number to use for the discount rate. Am I thinking about it correctly? Is this a reasonable number?


thanks for any comments
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