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Your aunt Suzie expects to live another 10 years. (Should she live longer, you are expected...

Your aunt Suzie expects to live another 10 years. (Should she live longer, you are expected to provide for her.). She currently has $50,000 in savings which she wishes to spread evenly in terms of purchasing power over the remainder of her life. Since she feels inflation will average 6% annually, her annual beginning-of-year withdrawals should increase at a 6% growth rate. If she earns 8% on her savings not withdrawn, how much should her first withdrawal be?

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Expert Solution

The present value of the withdrawals should be equal to the present amount in savings.

The first withdrawal amount can be calculated as follows:

jeff jeffy answered 2 years ago
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