Fixed versus indexed payments calculator

What escalation is actually worth.

Interactive: fixed versus indexed paymentsMedium

Present value, fixed
—
Present value, indexed
—
Difference
—
Indexation is worth
—
Final indexed payment
—
Reading
—

This is the calculation behind every "level or escalating?" choice — a pension, an annuity, a long lease. The level option always starts higher, and on these defaults the indexed one is worth roughly a third more in present-value terms. Choosing the bigger first payment is choosing the smaller total.

The idea behind it

This calculator belongs to Inflation, where the mechanism it computes is explained step by step, with the formula, what each input means and where the simple model stops being right. Everything is computed in your browser; nothing you type is sent anywhere.

More calculators from Inflation

All calculators

Information and education only. Every page, figure and calculator on this site exists to explain how financial instruments work. Nothing here is investment, tax or legal advice, a recommendation, or a valuation you can rely on. Full disclaimer