Value after 2nd year: $20,000 * 0.80 = $16,000

Tue, 05 May 2026 21:52:13 +0000

Understanding Value Depreciation: What $20,000 Retains After Two Years at 80% Annual Value Retention When considering long-term financial planning, understanding how value depreciates over time is essential—whether for investments, business assets, or personal consumption. One common calculation reveals how continued value retention impacts total worth. For example, an asset initially valued at $20,000 depreciates by 20% each year, retaining 80% of its value annually. After two years, the asset’s value drops to $16,000. ### Why Value Retention Matters Depreciation isn’t just a metric for accountants—it’s a critical factor in budgeting, forecasting, and making informed financial decisions. In this example, a visible 20% annual value loss means the asset erodes significantly over time, affecting resale potential, equity buildup, and long-term financial health.