# Finance – retirement – 1 problem

Example:

A person makes a stable income of \$100,000/year every year and saves 10% (\$10,000/year) which is invested at a real (after inflation) rate of 3% in order to retire in 30 years.  At retirement time will have a nest egg of about \$475K. (FV = ?  PV =  0, PMT =  -10K, I/Y = 3, n=30 or =FV(3,30,-10K)

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If this person wants the money to last 30 additional years (retirement period), he/she can withdraw a maximum of \$28K annually (PMT = ?, PV = \$475K (or \$560K), n=30, fv = 0 and I/Y = 3 or =PMT(3,30,

On the attachment is an EXCEL worksheet showing a different example.  Make up your own.  Discuss the results.

Here it is using EXCEL:   If you save  \$A per year for N years and earn I interest (in decimals) or return on your money you will have accumulated             =FV(I, N,A)

Then if you want to see the maximum fixed amount you can withdraw each year for N years given the FV amount above and earning I return on your money, the amount is        =PMT(I,N,0,FV).

Of course in both calculations either FV or the other amount must be negative, but you can interpret the result correctly.

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