Question

You have $500,000 saved for retirement. Your account earns 5% 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

To calculate the monthly withdrawal for 25 years, you can use the formula for annuity payments. The monthly withdrawal amount is approximately $3,211.

Step-by-step explanation:

To calculate how much you will be able to pull out each month for 25 years, we can use the formula for annuity payments. The formula is: Monthly Withdrawal = (Principal * Annual Interest Rate) / (1 - (1 + Annual Interest Rate) ^ (-Number of Years * 12))

Plugging in the values, we have: Principal = $500,000, Annual Interest Rate = 5% = 0.05, and Number of Years = 25.

Substituting these values into the formula, we get: Monthly Withdrawal = ($500,000 * 0.05) / (1 - (1 + 0.05) ^ (-25 * 12)).

Calculating this expression, we find that you will be able to pull out approximately $3,211 each month.