After the 30 years of working Charlie Conway has saved $950,000 in a 401k account for...

After the 30 years of working Charlie Conway has saved $950,000 in a 401k account for his retirement. If Charlie decides to take annual distributions to empty the account during the next 20 years, how much more would he be able to withdraw and spend each year if his 401k is a Roth 401k account as opposed to a Traditional 401k? Assume that the 401k earns 12% annual return, and Charlie is in the 25% tax bracket?

Expert Solution

Year	Opening balance	Interest	W/d	Closing balance
		(12% X Opening balance)	(trial & error method)	(Op bal+int-w/d)
1	9,50,000.00	1,14,000.00	1,27,184.84	9,36,815.16
2	9,36,815.16	1,12,417.82	1,27,184.84	9,22,048.14
3	9,22,048.14	1,10,645.78	1,27,184.84	9,05,509.07
4	9,05,509.07	1,08,661.09	1,27,184.84	8,86,985.32
5	8,86,985.32	1,06,438.24	1,27,184.84	8,66,238.72
6	8,66,238.72	1,03,948.65	1,27,184.84	8,43,002.52
7	8,43,002.52	1,01,160.30	1,27,184.84	8,16,977.98
8	8,16,977.98	98,037.36	1,27,184.84	7,87,830.50
9	7,87,830.50	94,539.66	1,27,184.84	7,55,185.32
10	7,55,185.32	90,622.24	1,27,184.84	7,18,622.72
11	7,18,622.72	86,234.73	1,27,184.84	6,77,672.60
12	6,77,672.60	81,320.71	1,27,184.84	6,31,808.47
13	6,31,808.47	75,817.02	1,27,184.84	5,80,440.65
14	5,80,440.65	69,652.88	1,27,184.84	5,22,908.69
15	5,22,908.69	62,749.04	1,27,184.84	4,58,472.89
16	4,58,472.89	55,016.75	1,27,184.84	3,86,304.80
17	3,86,304.80	46,356.58	1,27,184.84	3,05,476.53
18	3,05,476.53	36,657.18	1,27,184.84	2,14,948.87
19	2,14,948.87	25,793.86	1,27,184.84	1,13,557.90
20	1,13,557.90	13,626.95	1,27,184.84	0.00

Constructing table as shown above and by trial and error input value of 127,184.84 in withdrawls in each of period so as to get closing balance as zero at end of 20th year.

So W/d & spend each year = 127,184.84

Please Like the solution if satisfied with the answer and if any query please mention it in comments...thanks

ekkarill92 answered 2 years ago

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