After saving diligently your entire career, you and your spouse are ready to retire with a nest egg of $500,000. You need to invest this money in a mix of stocks and bonds that will allow you to earn $4,000 per month for 30 years. What annual interest rate (APR) do you need to earn?
A) 6.92 percent
B) 7.45 percent
C) 8.94 percent
D) 9.17 percent

Question

Quizplus · Accepted Answer

To find the required annual interest rate to earn $4,000 per month for 30 years from a $500,000 investment, we can use the formula for the present value of an annuity. The monthly withdrawal of $4,000 translates to $48,000 annually. Using financial calculators or present value of annuity formulas, we find that an annual interest rate of approximately 8.94% is needed to sustain these withdrawals for 30 years from a $500,000 nest egg.

After Saving Diligently Your Entire Career, You and Your Spouse