Question

11. Nadine is retiring at age 62 and expects to live to age 85. On the day she retires, she has $402,000 in her retirement savings account. She is somewhat conservative with her money and expects to earn 6 percent during her retirement years. How much can she withdraw from her retirement savings each month if she plans to spend her last penny on the morning of her death? A. $1,909.92 B. $2,147.78 C. $2,219.46 D. $2,416.08 E. $2,688.77

Answer 1

Answer:

E. $2,688.77

Explanation:

We need to calculate the PMT of an ordinary annuity at 6%

$PV \div \frac{1-(1+r)^{-time} }{rate} = C$

PV 402,000

time:

85 years - 62 years = 23 years of retirement

23 years  x   12 months per year = 276 months

rate: 6% annual rate we must divide over 12 months to convert into monthly: 0.06/12 = 0.005

$402000 \div \frac{1-(1+0.005)^{-276} }{0.005} = C$

C  $ 2,688.766

She can withdraw 2,688.76 per month