My friend, Jane, would like to retire by December 31, 2008. She is wondering whether she can withdraw $100,000 every year forever. How much her nest egg should be assuming the average return of her retirement account is 10%? Would you help her to figure it out?
What present value formula would you use to figure out the answer?
'Forever' implies that Jane doesn't intend to draw on the principal. Leaving the principal in tact and not assuming any effects of inflation or any changes in average rate of return, it would take $1,000,000 to provide $100,000 a year at 10%. Basically she ...
The problem is looking for a solution for the amount of money needed today to fund living expenses for the rest of a life. The solutions presents two scenarios for calculating the amount, and includes a link to help one determine the years of life remaining.