In: Finance
Jake will retire next month and will have $619,209 in Registered Retirement Savings Plans (RRSP’s). He wants a quarterly payment at the beginning of each quarter and expects to earn 10.8%, compounded quarterly in the equity and bond markets as an average. What quarterly amount would he be able to withdraw if his fund is expected to last 20 years?
Jake will have $619,209 at retirement in his RRSP account.
He will withdraw at the beginning of each quarter for the next 20 years.
Calculating the Quarterly withdrawal amount using PV of annuity due formula:-
Where, C= Periodic Withdrawal
r = Periodic Interest rate = 10.8%/4 = 2.70%
n= no of periods = 20 years*4 = 80
Present Value = $619,209
C = $18,471.20
So, quarterly amount would he be able to withdraw if his fund is expected to last 20 years is $18,471.20