Question

Assume that today is the first day of the month and that it is also your first day of retirement. You have saved for retirement over the years and have accumulated $499,000 in an investment account from which you plan to make monthly withdrawals during your retirement starting at the end of this month. Assuming you can earn annual returns of 7.5% in your investment account during your retirement years, how much money can you withdraw every month to make sure that your current balance will last you exactly 28 years?

Answer 1

Solution

Value Provided In The Question

Invested amount                   = 499000

Annual return                         = 7.5%

Compounding yearly period          = 28 (336 months)

In this question three important parts are given i.e. Investment amount, interest rate and duration. We can calculate amount to be receive per period through the excel PMT function.

Investment amount	$ 499,000.00
Duration in Months	336
Interest rate	7.5%
Monthly Withdrawals	$3,557.21

Calculation Steps

= pmt(7.5%/12,336,-499000)