Looking for a quick answer and explaination.

I know its some extension of the compound interest formula, but cannot account for the 50,000 taken out each year.



This is the question

8% interest annually earned on the fund

50,000 each year to spend in the retirement

retire for 35 years



how much of a fund will u need to save in order provide for 35 year retirement.

A. 597,383.61
B. 529, 700.71
C. 582,728.42
D. 629,326.68

This post was edited by LAP4JSP on Jan 27 2014 10:19pm

so 50k gets interest one year, 100k gets interest two years, 150k gets interest three years, etc.

1.08^1 * 50k * 1
+ 1.08^2 * 50k*2
+ 1.08^3 * 50k*3
...
+ 1.08^35 * 50k*35
= summation from i = 1 to 35 of (1.08^i*50*i)
= 50 * summation from i = 1 to 35 of (i*1.08^i)

you can break down the summation using this formula (note the bounds are different)


hmm actually i think i'm calculating the total value, not the starting quantity. whatever. i lost interest. pun intended.

personally i'd just write a script to calculate it instead of trying to reason it.

This post was edited by carteblanche on Jan 27 2014 10:43pm

you have to work it backwards
at end of year 34 you need to have $50k
which means that at the end of year 33 you have to have $50k/1.08 = $46296.30 left after taking out $50K for year 34
it like 'inverse' compound interest, have fun

'carteblanche' might be right with the script comment

This post was edited by brmv on Jan 28 2014 06:24am

Couldn't you use:

50,000 * (1 - (1+.08)^-35) / .08 = 582728.4108

??