To understand why lifetime present values can't be compared, we first need to understand that to get the values that are shown in the Lifetime Balance Sheet (LBS) we don't simply add together all of the numbers over the life of the model. For example, to get the present value of all the annual Social Security benefits we don't just add them all together over the life of the plan. For example, if someone gets a Social Security benefit of $30,000 per year over 20 years, the present value is typically not 30,000 * 20 = $600,000. Instead, each year going forward, that $30,000 is counted as less than the 30,000 that we entered for the first year. In other words, future values are "discounted." And each year, incrementally, the discount lowers the amount slightly more than the previous year. *The LBS shows the sum of these discounted values, not the sum of the starting amount of 30,000 simply multiplied by the number of years in the stream of income.*

And what factor is used to discount this annual stream of numbers? Answer: The real rate of return on regular assets. That is, where inflation is 2% and nominal return is 3% the real rate of return is roughly 1%. And this 1% is used to calculate the discount across the stream of income or receipts. We would say, in this case, that the discount rate is 1%.

If the discount rate used for one stream is 1% and the discount rate for the exact same stream in an Alternative Plan you are comparing it to is 2%, then you will get a different lifetime present value even though you are comparing the same stream of numbers. You would no longer have an apples to apples comparison of the two streams of receipts or expenses because they use different discount rates. When you change either the inflation rate or the rate of return on regular assets, you will create a different discount rate.

If the discount rate is 0% (e.g., 2.5% inflation and 2.5% nominal return) then in this very particular case with 0% discount rate, the stream of receipts or expenses is actually the simple sum of that stream of numbers.