You estimate that by the time you retire in 35 years, you will have accumulated savings of $2 million. If the interest rate is 8% and you live 15 years after retirement, what annual level of expenditure will those savings support?

We can use the present value of an annuity formula to determine the annual distribution. I'm assuming that your distributions will be made in a similar manner to an annuity due (the first payment happens when you retire).

annual distribution = principal balance / PV annuity factor

annual distribution = $2,000,000 / 9.24424 = $216,350.94

if instead, the first distribution is received at the end of the first year of retirement, then the annual distribution will be:

annual distribution = principal balance / PV annuity factor

annual distribution = $2,000,000 / 8.55948 = $233,659.05

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