Finance

Retirement Present Value Calculator (5 Years)

Find how much a future amount is worth today. This retirement version uses a 5-year planning term as its starting point.

The Present value figure is the lump sum worth setting aside today so that, growing at the annual rate you entered, it reaches your future amount in 5 years. A figure well below the future amount shows how much of the target comes from growth over time rather than from money set aside today, and a higher rate or a longer term makes that figure smaller.

Formula

Present value equals future amount divided by one plus rate to the power of years.

How it works

A future amount is worth less today because money today can earn interest.

Worked example

Future amount $50,000, annual rate 5%, term 5 years. Using the page formula, present value equals $50,000 divided by 1.05 to the power of 5, which is $39,176.31. That is the calculator's own result for these defaults. The discount is $50,000 minus $39,176.31, which is $10,823.69, so time and interest remove $10,823.69 of value between today and year 5.

Who this term suits for a retirement saver: a saver close to retirement who needs a known lump sum soon, such as clearing a remaining mortgage balance before retiring, funding the first years of retirement, or paying a deposit on a retirement home, where the money must be ready within a few years and there is little time left for growth to help.

FAQs

What is present value?
Present value is what a future sum is worth today after allowing for interest over time.

Is this retirement calculator exact?
No, it is an estimate for planning only, based on the numbers you enter.

Are these figures financial advice?
No, they are estimates for planning only, not financial advice. Check with a qualified adviser for decisions involving large sums.

Is $39,176.31 what I should set aside today for a $50,000 retirement cost in 5 years?
Yes, at a steady 5% a year, $39,176.31 invested today would grow to $50,000 in 5 years, so it is the amount to set aside now if the rate holds and no fees or taxes apply.

Why is the discount only $10,823.69 over 5 years?
Because discounting only runs for 5 years, so time has had little chance to reduce the value; the discount grows much larger over longer terms, as the 10-year and 20-year pages show.

What if retirement costs rise faster than 5% over the 5 years?
Then $50,000 will not be enough in 5 years, and the amount to set aside today would be higher; the 5% rate here is only the entered assumption, not a forecast of retirement costs.

Estimates only, not financial advice. Figures are approximate and do not include all fees, taxes, or changing rates unless stated.