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You have just retired with savings of $3 million. If you expect to live for 30 years and to earn 7% a year on your savings, how much can you afford to spend each year (in $ dollars)? $_______. (Assume that you spend the money at the start of each year.)

User Dipdipdip
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1 Answer

5 votes

Answer:

You can afford to spend 241,759.20 each year

Step-by-step explanation:

Use the Annuity Formula

A=PV/(1-(1+r)^-N)/r

(1-(1+r)^-N)/r=1-(1+7%)^-30/7%

=1-(1+0.07)^-30/0.07

=(1-0.1313671171545898306 )/0.07

=12.40904118350585

A= 3,000,000/12.40904118

A=241,759.19852 (241,759.20 rounded to nearest hundredth)

User Delmo
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