Questions: You have 400,000 saved for retirement. Your account earns 7% interest. How much will you be able to pull out each month, if you want to be able to take withdrawals for 20 years?

Solution Steps

The initial savings amount (P) is $400000, the annual interest rate (r) is 7%, and the withdrawal period (t) is 20 years.

The formula to calculate the monthly withdrawal amount (M) is: $$M = \frac{P \times \frac{r}{12}}{1 - (1 + \frac{r}{12})^{-12t}}$$ Where:

• \(P\) is the initial savings amount,
• \(r\) is the annual interest rate (as a decimal), which is 0.07,
• \(t\) is the withdrawal period in years, which is 20,
• \(M\) is the monthly withdrawal amount.

Substituting the given values into the formula, we get: $$M = \frac{400000 \times \frac{0.07}{12}}{1 - (1 + \frac{0.07}{12})^{-12 \times 20}}$$ Simplifying the above expression gives us the monthly withdrawal amount.

Final Answer: