You are planning your retirement in 10 years. You currently have $200,000 in a bond account and $400,000 in a stock account. The stock account will earn an 11.5% return and the bond account will earn a 7.5% return. When you retire, you plan to withdraw an 2 equal amount for each of the next 25 years at the end of each year and have nothing left. Additionally, when you retire you will transfer your money to an account that earns 6.75%. How much can you withdraw each year

Respuesta :

Answer:

$134,235

Explanation:

The future value (FV) of each when you retire in 10 years:

FV of Bond = $200,000 *(1+7.5%)^10 = $412,206

FV of Stock = $400,000 *(1+11.5%)^10 = $1,187,979

After 10 years, the total amount you have is $1,600,185 (= $412,206 +  $1,187,979)

The we use formula PMT in excel to calculate the amount you can withdraw in 25 years:

=PMT(6.75%,25,-1600185) = $134,235

Please see excel attached for the calculation.

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