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You have $400,000 saved for retirement. Your account earns 2% interest. How much will you be able to pull out each month, if you want to be able to take withdrawals for 15 years? Round the answer to the nearest dollar.

User Manuel M
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1 Answer

21 votes
21 votes

Step-by-step explanation

In this question, we have the following information;

r = 0.022% annual rate

k = 12since we’re withdrawing monthly

N = 1515 years

P = $400,000 we are beginning with $400,000

d= regular withdrawal

We would be using the formula for Payout annuity below;


P=\frac{d\lparen1-\left(1+(r)/(k)\right?^(-Nk)\text{\rparen}}{(r)/(k)}

Therefore, we have that;


\begin{gathered} 400000=(d\lparen1-\left(1+(0.02)/(12)\right?^(-15*12)\rparen)/((0.02)/(12)) \\ d\lparen1-\left(1+(0.02)/(12)\right?^(-15*12)\rparen=400000*(0.02)/(12) \\ d=(400000*(0.02)/(12))/(\lparen1-\left(1+(0.02)/(12)\right?^(-15*12)\rparen) \\ d=2574 \end{gathered}

Answer:$2574


2574

User TheGraeme
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