Nadine is retiring today at age 65 and expects to live to age 85. She has $536,000 in her retirement savings account. She is somewhat conservative with her money and expects to earn 6 percent compounded monthly during her retirement years. How much can she withdraw from her retirement savings each month if she plans completely empty the account?
A)$3,840
B)$46,731
C)$1,160
D)$4,673

Question

Nadine is retiring today at age 65 and expects to live to age 85. She has $536,000 in her retirement savings account. She is somewhat conservative with her money and expects to earn 6 percent compounded monthly during her retirement years. How much can she withdraw from her retirement savings each month if she plans completely empty the account?
A)​$3,840
B)​$46,731
C)​$1,160
D)​$4,673

Quizplus · Accepted Answer

To find the monthly withdrawal amount, we use the formula for the annuity payment given the present value, interest rate, and number of periods. The formula rearranges to P = (r*PV) / [1 - (1 + r)^-n], where P is the payment, PV is the present value ($536,000), r is the monthly interest rate (6%/12 = 0.5%), and n is the total number of payments (20 years * 12 months = 240). Plugging in the values gives a monthly withdrawal of approximately $3,840.

Nadine Is Retiring Today at Age 65 and Expects to Live