SOLUTION: You have $400,000 saved for retirement. Your account earns 4% interest. How much will you be able to pull out each month, if you want to be able to take withdrawals for 20 years?

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Question 1204481: You have $400,000 saved for retirement. Your account earns 4% interest. How much will you be able to pull out each month, if you want to be able to take withdrawals for 20 years?
Answer by MathLover1(20849) About Me  (Show Source):
You can put this solution on YOUR website!

Recall that the formula for the present value of the ordinary annuity,

P=%28x%2Fi%29%281-%281%2Bi%29%5E%28-nk%29%29
if
P=400000
i%2F12=4%2F12%=0.04%2F12=> (monthly)
n=20
k=12 (months)
then
400000=%28x%2F%280.04%2F12%29%29%281-%281%2B0.04%2F12%29%5E%28-20%2A12%29%29



400000=165.022x

x=400000%2F165.022+

x=2423.92

you would be able to withdraw 2423.92 each month for 20+years