You are ready to retire.A glance at your 401(k)statement indicates that you have $750,000.If the funds remain in an account earning 9.0%,how much could you withdraw at the beginning of each year for the next 25 years?
A) $55,620
B) $70,050
C) $35,830
D) $2,500

Question

Quizplus · Accepted Answer

To calculate the amount that can be withdrawn at the beginning of each year for the next 25 years, we need to use the formula for Present Value of an Annuity:

Annual Withdrawal = (Present Value x i) / ((1 + i)^n - 1)

Where,
Present Value = $750,000
i = 9% (annual interest rate)
n = 25 (number of years)

Plugging in the values, we get:

Annual Withdrawal = (750,000 x 0.09) / ((1 + 0.09)^25 - 1)
= $70,050

Therefore, the best choice is B, with an annual withdrawal of $70,050.

You Are Ready to Retire