Question

Uncle Moneybags has $500,000 saved for retirement. He has an account earning 8% interest. If Uncle Moneybags wants to be able to make withdrawals for 15 years, how much can he withdrawal each month? Round to the nearest cent.

Answer 1

Account saved by Uncle Moneybags for retirement = $500,000

Calculating the monthly withdrawal for 15 years he can make using PV of ordinary annuity formula:-

Where, C= Periodic Payments

r = Periodic Interest rate = 8%/12 = 0.6666%

n= no of periods = 15 years*12 = 180

Present value = $500,000

C = $4778.26

So, the amount of withdrawal each month he can make is $4778.26

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