Kevin retired on 1/1/2020 and started to withdraw $2500 at the end of each month from...

Kevin retired on 1/1/2020 and started to withdraw $2500 at the end of each month from an account (which earns 2.35% interest compounded monthly) containing $439,979.16. If Kevin keeps on making the set withdrawal and the interest rate remains the same, then the account should last for ___ years. The total interest that Kevin earns from the account (from the time that he starts withdrawing the $2500 to the very last withdrawl that he makes) would be $____.

Expert Solution

Use the formula NPER(2.35%/12,-2500,439979.16) in Excel to get to know the time period. The number of months would come as 216 which is 18Y roughly. Total interest can be found by multiplying the number of months * monthly withdrawal (2500 USD) - Principal Amount = (216*2500) - 439,979.16 = 540000-439979.16 = $100020.85 (Rounded up)

We can also see it by simulation (Please see it on the right side of the sheet)

orchestra answered 1 year ago

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