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Capital Needed for a Desired Pension
Calculates the capital needed at the start of retirement to draw a fixed pension over a given period (capital fully used up at the end).
Type values, assign them with the value keys and press "Solve". It is the same financial calculator as under "Calculator" in the menu above.
Examples for this calculator
Each example is a story with explanation and a "what you learn" takeaway.
Formula
K0 = R · (1 − q^(−n))/(q − 1)
How the formula works
The present value reverses compound interest: each future pension payment is discounted because a dollar in 20 years is worth less today. The sum of all these discounted payments is the capital that must suffice at the start of retirement. Takeaway: behind a small monthly pension sits a large pool of capital.
Present value of an ordinary annuity.
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