Answer to Question #142883 in Finance for abhi

Question

Your uncle has $400000 invested at 8.5% compounded monthly, and he now wants to retire. He wants to withdraw $40,000 at the end of each year, starting at the end of this year. He also wants to have $35,000 left to give you when he ceases to withdraw funds from the account. For how many years can he make the $40,000 withdrawals and still have $35,000 left in the end?

Answer 1

Use excel, formula in first cell:

$400000*(1+0.085/12)^{12}$

In second cell:

$first\ cell-40,000$

Repeat these formulas and in end of 24 year you will have 91,402.19. You withdraw 40,000 and you will have in the start of 25 year 51,402.19. So, 24 year is the last.

Your uncle can make the 40,000 withdrawals during 24 years and he has 35,000 left in the end.