Norah has $2,000,000 in her retirement account. She wants to make 20 equal withdrawals, beginning immediately. The investment plan earns 8%. How much should each withdrawal be to completely deplete the fund after the 20th withdrawal?

Question

Quizplus · Accepted Answer

The correct answer is A.The future value of the 20th withdrawal is $0. The present value of the 20th withdrawal is $188,615. The present value of the 19th withdrawal is $188,615 / (1 + 0.08) = $174,644. The present value of the 18th withdrawal is $174,644 / (1 + 0.08) = $161,929. And so on. The present value of the first withdrawal is $188,615 / (1 + 0.08)^19 = $43,704. Therefore, each withdrawal should be $188,615 / 20 = $188,615.

Norah Has $2,000,000 in Her Retirement Account