Why is future money worth less?

Because money you hold now can earn. A dollar today invested at 6% is $1.06 in a year, so a dollar arriving in a year is worth about 94 cents now. It is not inflation — the same logic holds with zero inflation — although inflation is one reason discount rates are above zero.

Should I take the lottery lump sum or the annuity?

Compare the lump sum with the present value of the payments at a rate you could actually earn. Advertised jackpots are the sum of thirty payments, which is why the cash option is roughly half. If you can earn more than the implied rate, the lump sum wins on arithmetic — the rest of the decision is about tax, discipline and how long you expect to live.

What discount rate should I use?

Your opportunity cost at comparable risk. For a guaranteed government payment, a Treasury yield. For a business project, the cost of capital, often 8 to 12%. For a risky private deal, higher again. The rate encodes both the time and the risk, and quoting a present value without saying the rate is quoting nothing.

What is net present value?

The present value of what comes in, minus the present value of what goes out. A project with a positive NPV creates value at the rate you discounted at; a negative one does not. It is the same arithmetic as this page applied to both sides of a decision.

Present Value Calculator

With amount received in the future 100000 usd, years until you get it 10, discount rate 6 percent, or an amount received every year 0 usd, present value comes to $55,839.48 — worth today. It is reached in 7 steps, the last of which is 55839.478 + 0, and each one is printed on the page with its numbers filled in. The formula is the one published by US SEC Investor.gov, not an approximation fitted to it.

What a future sum, or a stream of payments, is worth today at a given discount rate. Names what the wait costs, as money and as a share of the nominal total.

Formula and sources checked 27 August 2026 · How we check

Amount received in the future 100000, Years until you get it 10, Discount rate 6

$55,839.48

Worth today for the example below. Editing a field recomputes the calculator below; this figure holds the answer the page was loaded with.

It is written into the HTML rather than drawn by a script, so a search engine reading this page without running JavaScript still finds an answer.

Amount received in the futureusdYears until you get itDiscount ratepercentWhat the money could earn if you had it now. A safe rate for a certain payment, higher for a risky one.Or an amount received every yearusdFor an annuity: this much a year for the number of years above.

Worth today

$55,839.48

Discount factor: 1 / pow(1 + 6 / 100, 10)0.558
Present value of the lump sum: 100000 * 0.5583948$55,839
Present value of the yearly payments: 0 * (1 - 0.5583948) / (6 / 100)$0
Present value in total: 55839.478 + 0$55,839
Nominal total received: 100000 + 0 * 10$100,000
What the wait costs: 100000 - 55839.478$44,161
As a share of the nominal total: 44160.522 / 100000 * 10044.161 %

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Worked example

$100,000 in ten years is worth $55,839 today at a 6% discount rate. The $44,161 difference is not a fee — it is what the money would have earned in the meantime, which is the reason a lottery lump sum is so much smaller than the advertised jackpot.

How to work it out yourself

1.Enter what you will receive and when. For a stream of yearly payments, use the annual payment field instead of the lump sum.
2.Pick the discount rate deliberately: it is what the money could earn elsewhere at comparable risk. A higher rate makes future money worth less today, and the choice of rate moves the answer more than anything else.
3.Compare a lump sum offer against the present value of the payments it replaces. If the offer is lower, the difference is what you are paying for the money now.

The formula

Discount factor1 / pow(1 + 6 / 100, 10)
Present value of the lump sum100000 * 0.5583948
Present value of the yearly payments0 * (1 - 0.5583948) / (6 / 100)
Present value in total55839.478 + 0
Nominal total received100000 + 0 * 10
What the wait costs100000 - 55839.478
As a share of the nominal total44160.522 / 100000 * 100

Source: US SEC Investor.gov — compound interest and the time value of money

Questions people actually ask

Why is future money worth less?: Because money you hold now can earn. A dollar today invested at 6% is $1.06 in a year, so a dollar arriving in a year is worth about 94 cents now. It is not inflation — the same logic holds with zero inflation — although inflation is one reason discount rates are above zero.
Should I take the lottery lump sum or the annuity?: Compare the lump sum with the present value of the payments at a rate you could actually earn. Advertised jackpots are the sum of thirty payments, which is why the cash option is roughly half. If you can earn more than the implied rate, the lump sum wins on arithmetic — the rest of the decision is about tax, discipline and how long you expect to live.
What discount rate should I use?: Your opportunity cost at comparable risk. For a guaranteed government payment, a Treasury yield. For a business project, the cost of capital, often 8 to 12%. For a risky private deal, higher again. The rate encodes both the time and the risk, and quoting a present value without saying the rate is quoting nothing.
What is net present value?: The present value of what comes in, minus the present value of what goes out. A project with a positive NPV creates value at the rate you discounted at; a negative one does not. It is the same arithmetic as this page applied to both sides of a decision.

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