Question

You recently received inheritance. Woo hoo!! You decided to invest it in hopes of retiring in 30 years without making any more contributions to your savings. If you invest your money in an account that pays 4% interest compounded annually and you plan on withdrawing $150,000 at the beginning of each year of retirement for 20 years of retirement, approximately how much money did you inherit?

Answer 1

Nper = 20
PMT = 150000
Rate = 4%
FV = 0

Amount at the start of the retirement can be calculated by using the following excel formula:
=PV(rate,nper,pmt,fv)
=PV(4%,20,-150000,0)
= $2,120,090.91

Calculation of amount of money you inherit:

FV = $2,120,090.91
Nper = 30
Rate = 4%
PMT = 0

Amount of money you inherit can be calculated by using the following excel formula:
=PV(rate,nper,pmt,fv)
=PV(4%,30,0,-2120090.91)
= $653,663.61

Amount of money you inherit = $653,663.61