Question

You are planning to save for retirement over the next 30 years. To do this, you will invest $750 per month in a stock account and $250 per month in a bond account. The return of the stock account is expected to be 10 percent, and the bond account will pay 6 percent. When you retire, you will combine your money into an account with a return of 5 percent. How much can you withdraw each month from your account assuming a 25-year withdrawal period

Answer 1

Answer:

Withdrawal each month = $11,379.01

Explanation:

As per the data given in the question,

Value of investment at the time of retirement

= 750 × (((1+(10%÷12))^(30×12) -1) ÷ (10%÷12)) + 250 × (((1+ (6% ÷ 12))^(30×12) -1) ÷ (6%÷12))

= $1,946,494.70

So, we can calculate the withdrawal of each month by using following formula:

Withdrawal each month = $1,946,494.70 ÷ ((1-(1+(5% ÷ 12))^(-25×12)) ÷ (5% ÷ 12))

= $11,379.01