Question

You have $300,000 saved for retirement. Your account earns 10% interest. How much will you be able to pull out each month, if you want to be able to take withdrawals for 25 years?

Answer 1

You need to use Financial calculator to solve this problem. You can download it.

Calculator strokes:

N=> 25 * 12 = 300 (You will live for 25 years after retirement, so month wise it will be 300)

PV= 300,000 (This is the amount that you saved for retirement, so this is the present value of your corpus)

I/Y => 10% / 12 = 0.8333% (You will earn 10% interest on the corpus each year, so monthly you will earn 0.8333%)

FV = 0 (After 25 years the corpus will be exhausted and turn to zero)

CPT + PMT = $2,726

So if the investor invests $300,000 for 25 years at 10% interest, then he can withdraw $2,726 monthly until the corpus gets exhausted.