What size nest egg do we need in order to retire with a 20-year annuity that yields $5000 per month if the retirement account pays an APR of 6%?

Question

Quizplus · Accepted Answer

We can use the annuity formula, A = (PMT/i) x (1 - (1/(1+i)^n)) to solve for the nest egg, where PMT is the monthly payout, i is the monthly interest rate (APR/12), and n is the number of months (20 years x 12 months/year = 240 months).

Plugging in the values, we get:
A = (5000/0.005) x (1 - (1/(1+0.005)^240))
A = $697,903.9

Therefore, the nest egg needed to retire with a 20-year annuity that yields $5000 per month if the retirement account pays an APR of 6% is $697,903.9.

What Size Nest Egg Do We Need in Order to Retire