The first year after you retire you want to be able to withdraw $100,000 from your savings account. Every year after that you want to increase your withdrawals by 2%. You expect that the account will earn 6% annual interest. How much money must you have in your savings account when you retire to make sure that your money lasts for 25 years

Total amount of money to be had in savings is $1,544,352.63

Explanation:

First withdrawal is $100,000 and is increases by 2% every year till 25 years.

The amount required in savings account can be calculated by knowing the present value of growing annuity.

Annuity =

given, p = $100,000

r = 6% = 0.06

g=2% = 0.02.

n = number of periods = 25.  

= (100,000 ÷ (0.06 - 0.02)) × [ 1 - (1.02 ÷ ]

= $2,500,000 × [1 - 0.382258949]

= $2,500,000 × 0.61774105

= $1,544,352.63

you get one warning and if you do something to violate the guidelines of after that you get kicked off.

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