If you accumulate $600,000 in your retirement account and can earn a constant annual rate of 8% on this money after retirement, how much will you be able to live on each year if you
Expect to live for 30 years after retirement? Assume that you will make you first withdrawal
On the day your retire, and round your answer to the nearest dollar.

Question

Quizplus · Accepted Answer

We can use the annuity formula to find the annual withdrawal amount:

PV = (PMT / r) x (1 - (1 + r)^-n)

Where PV is the present value (initial balance) of the account, PMT is the annual withdrawal amount, r is the annual interest rate, and n is the number of years of withdrawals.

Plugging in the numbers, we get:

$600,000 = (PMT / 0.08) x (1 - (1 + 0.08)^-30)

Solving for PMT, we get:

PMT = $49,349.45

Rounding to the nearest dollar, we get:

Answer: B) $49,349

This means that you can withdraw approximately $49,349 per year for 30 years in retirement, assuming an 8% annual rate of return and a starting balance of $600,000. We can use the formula for annuity:
A = (PMT * (1 - (1 + r)^(-n))) / r
where A is the amount we can withdraw each year, PMT is the constant amount we withdraw each year, r is the annual interest rate, and n is the number of years we expect to withdraw.
Plugging in the values, we get:
A = (PMT * (1 - (1 + 0.08)^(-30))) / 0.08
600,000 = (PMT * (1 - 0.084)) / 0.08
600,000 = 11.76 * PMT
PMT = 51,020.41
Rounding to the nearest dollar, we get:
Answer: B) $49,349

If You Accumulate $600,000 in Your Retirement Account and Can