SOLUTION: You want to be able to withdraw $35,000 each year for 20 years. Your account earns 5% interest. a) How much do you need in your account at the beginning? $ b) How much t

Question 1163416: You want to be able to withdraw $35,000 each year for 20 years. Your account earns 5% interest.
a) How much do you need in your account at the beginning?
$

b) How much total money will you pull out of the account?
$

c) How much of that money is interest?
$

Answer by ikleyn(53751) (Show Source): You can put this solution on YOUR website!
.


Use the general formula  X = .


In this case  the withdrawal annual rate is  W = $35000,  the annual compounding rate 
is  r = 0.05,  p = 1 + 0.05 = 1.05, the number of withdrawal periods  is n = 20. So


          X =  = 457,986.24 dollars. 


It is how much your account should  have at the beginning.    


You will pull out  35000*20 = 700,000 dollars.


The difference  700,000 - 457,986.24 = 700,000 - 457,986.24 = 242,013.76 is the interest.

Solved.     All questions are answered.

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See my lessons in this site associated with annuity saving plans and retirement plans

    - Ordinary Annuity saving plans and geometric progressions
    - Annuity Due saving plans and geometric progressions
    - Solved problems on Ordinary Annuity saving plans
    - Withdrawing a certain amount of money periodically from a compounded saving account (*)
    - Miscellaneous problems on retirement plans

and especially lesson marked (*) in the list as the most relevant to the given problem.

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