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The first year after you retire you want to be able to withdraw $100,000 from your savings account. Every year after that you want to increase your withdrawals by 2%. You expect that the account will earn 6% annual interest. How much money must you have in your savings account when you retire to make sure that your money lasts for 25 years

Answer :

funmilaciousfunmie78

Answer:

Total amount of money to be had in savings is $1,544,352.63

Explanation:

First withdrawal is $100,000 and is increases by 2% every year till 25 years.

The amount required in savings account can be calculated by knowing the present value of growing annuity.

Annuity = [tex](p /(r-g) *[ 1 -(1+g / 1+r)^n][/tex]

given, p = $100,000

r = 6% = 0.06

g=2% = 0.02.

n = number of periods = 25.  

= (100,000 ÷ (0.06 - 0.02)) × [ 1 - (1.02 ÷ [tex]1.06)^{25[/tex] ]

= $2,500,000 × [1 - 0.382258949]

= $2,500,000 × 0.61774105

= $1,544,352.63

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