Question

You have $500,000 saved for retirement. Your account earns 4% 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

amount pull out each month is $4518.44

Explanation:

principal (p) = $500000

rate (r) = 4% = 0.04 = 0.04/12 per month

time period = 25 years = 25 × 12 = 300 months

to find out

how much amount pull out each month

solution

we will calculate the amount by given formula i.e.

principal = amount ( 1 -
`(1+r)^(t)` ) / r ....................1

now put the value amount rate time in equation 1

we get amount

500000 = amount ( 1 -
`(1+0.04/12)^(300)` ) / 0.04/12

500000 = amount (2.711062 ) / 0.00333

amount = 1666.6666 * 2.711062

amount = 4518.44

amount pull out each month is $4518.44