You have $500,000 saved for retirement. Your account earns 8% interest. How much will you be able to pull out each month, if you want to be able to take withdrawals for 25 years?

you would be able to withdraw $3859.08 each month for 25 years

Explanation:

Payout annuity are normally used for retirements for example you have $500,000 saved for retirement, your account earns 8% interest and you want to take money out each month for about 27 years. The Payout Annuity Formula is given by:

Where:

P₀ =  balance in the account at the beginning (starting amount, or principal).

d = regular withdrawal amount (the amount you take out each year, each month, etc.)

r = annual interest rate

k = number of compounding periods in one year.

N = number of years we plan to take withdrawals.

From the question, it is given that:

P₀ =   $500,000

r = 8% = 0.08

k = 12 (for one year)

N = 25

d = ?

substituting values,

d = $3859.08

Therefore, you would be able to withdraw $3859.08 each month for 25 years

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