You are retired, have $264,500 in your savings, withdraw $2,000 each month, and earn 4.5 percent,...
You are retired, have $264,500 in your savings, withdraw $2,000 each month, and earn 4.5 percent, compounded monthly. How long will it be until you run out of money?
Homework Answers
PV = Amount in Savings = $264,500
P = Withdrawl amount per month = $2,000
r = interest rate per month = 4.5% / 12 = 0.375%
Present value of annuity = P *[1 - (1+r)^-n] / r
$264,000 = $2,000 * [1 - (1+0.375%)^-n] / 0.375%
$990 = $2,000 * [ 1 - (1.00375)^-n]
[1 - (1.00375)^-n] = 0.495
(1.00375)-n = 0.505
(1.00375)n = 1.98019802
n = 182.5272099
n= 182.53 months
Therefore, it will take 182.53 months to run out of money
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