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Suppose you have $800,000 in your savings account when you retire. Your plan is to withdraw...

Suppose you have $800,000 in your savings account when you retire. Your plan is to withdraw $6,000 a month as retirement income from this account. You expect to earn annual interest of 6 percent, compounded monthly, on your money during your retirement. How many months can you be retired until you run out of money?

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Answer #1

Current Value of savings(Present Value) = $800,000

Monthly withdrawal from account = $6000

Calculating the No of months you can withdraw from saving account using Present value of oridinary annuity formula:-

Where, C= Periodic Payments = $6000

r = Periodic Interest rate = 6%/12 = 0.5%

n= no of periods

taking Log on log sides,

-0.47712125 = -n*0.00216606

n = 220.27

So, you can retire till 220 months(rounded to whole number)

If you need any clarification, you can ask in comments.     

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