Question

You have just retired with savings of $2 million. If you expect to live for 57 years and to earn 7% a year on your savings, how much can you afford to spend each year (in $ dollars)

Answer 1

Annual withdraw= $143,023.66

Step-by-step explanation:

Giving the following information:

Present value (PV)= $2,000,000

Number of periods (n)= 57

Interest rate (i)= 7% a year

To calculate the annual withdrawal, we need to use the following formula:

Annual withdraw= (PV*i) / [1 - (1+i)^(-n)]

Annual withdraw= (2,000,000*0.07) / [1 - (1.07^-57)]

Annual withdraw= $143,023.66