What is the difference between Liquidation Value and Present Value?

The Household Balance Sheet may also include financial accounts a household currently owns. Instead of using a present value calculation to determine the value of these accounts on the Household Balance Sheet, these items are represented in terms of their current liquidation value.

Liquidation value is the current market value of an account less any applicable transaction costs, taxes, or early withdrawal penalties.

How we determine liquidation value for each account type is explained further in the Household Accounts section.

NOTE: The Household Balance Sheet does not try to estimate what an account will be worth in the future based on some assumption of investment returns. Instead, the Household Balance Sheet discounts the household’s future spending goals to determine the financial resources the household needs in today’s dollars to fund those goals.

By using liquidation value, the Household Balance Sheet provides a more honest and conservative valuation a household’s current financial accounts that can be used to fund their goals.