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Your uncle has $375,000 and wants to retire. He expects to live for another 25 years and to earn...

Question:

Your uncle has $375,000 and wants to retire. He expects to live for another 25 years and to earn 7.5% on his invested funds. How much could he withdraw at the end of each of the next 25 years and end up with zero in the account?

a) $30,361.46

b) $35,323.58

c) $31,959.43

d) $28,843.38

e) $33,641.50

Retirement Spending:

The amount of spending you can afford during retirement is determined by the amount of retirement saving you have before retirement as well as the rate of return you earn on the savings. An additional factor is the expected length of retirement.

Answer and Explanation: 1

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The answer is e).

The amount he can withdraw is such that the present value of the withdrawals is exactly equal to the amount he has saved up before...

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How to Calculate the Present Value of an Annuity

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Chapter 8 / Lesson 3
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Learn how to find present value of annuity using the formula and see its derivation. Study its examples and see a difference between Ordinary Annuity and Annuity Due.


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