Early Retirement - TVM Calculation Examples

Q. Steven White is considering taking early retirement, having saved $400,000. White desires to determine how many years the savings will last if $40,000 per year is withdrawn at the end of each year. White feels the savings can earn 10 percent per year.

Open the Present Value of Annuity screen. Select solve for Time Period.

Present Value: 400000

Annual Interest Rate: 10
Payment Amount: 40000
Payment Frequency: Yearly
Compounding Interval: Yearly
End Balance: 0
Payment mode: End

Ans: forever (Since 10% of 400000 is 40000 and Mr White only takes out the interest part of his investment every year)