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Time value of money

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Sudhanshu

Assistant Manager at Union Bank of India

37 Points Posted on 25 May 2020

Neha would retire 30 years from today and she would need ₹ 6,00,000 per year after her retirement, with the first retirement funds withdrawn one year from the day she retires. Assume a return of 7% per annum on her retirement funds and if her planning is for 25 years after retirement, Calculate:
a. How much lumpsum she should deposit in her account today so that she has enough funds for retirement?

b. How much she should deposit each year so that she has enough funds for retirement?

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Quick Summary

This discussion explores the time value of money in the context of retirement planning. It presents a scenario where an individual needs ₹6,00,000 annually for 25 years post-retirement, starting one year after retiring in 30 years. The core questions are how much lump sum needs to be deposited today or how much should be deposited annually, assuming a 7% annual return, to meet these retirement goals.