on 18-Feb-2026 (Wed)

There are two types of calculations for estimating future value. If we have currently a pool of investments and no money added or removed, then we are talking about the “future value of a single sum”. Its equation has four variables. They are: the present value of investments, the assumed interest or growth rate, the compounding time period and the future value. If you know any three of these four variables you can then calculate the fourth. Here is the equation to calculate the future value of a single sum

When we talk about retirement savings, we need to take into account the increases in cash flow. For example, before retirement, you may be increasing the periodic deposit amounts in line with your increased earnings as time goes on. On the other hand, after retirement, you will likely increase your withdrawals over time to keep up with inflation.

After retirement, we begin withdrawing money from the portfolio. This is known as the “distribution” stage. This is because money is distributed out of the portfolio on a periodic basis. Some people use the term “decumulation” to describe this stage. This implies that portfolios will decumulate, i.e. their value will decline over time during the retirement stage. However, just because you take money out of a portfolio does not necessarily mean its value will decline

When calculating out the savings required for financing retirement, the first step is to establish a detailed retirement budget. A budget indicates the expected annual income from all sources on one hand, and all living expenses on the other hand. A shortfall of income exists if annual expenses are greater than expected annual income.