What amount will I be able to withdraw if I continue with my current savings scheme?

Problem

You have $1,000 in a savings account today and you intend to deposit $100 at the beginning of each year for 25 years. Since you'll earn more each year, annual deposits will increase by 3 %.

Then you'll start a series of 15 annual withdrawals, which will increase by 2 % to compensate for inflation.

If your rate of return after taxes is 4 %, how much will be the first withdrawal?

Solution

Set up the following cash flow or open the "Retirement - Withdrawals" example in the Help examples folder.

Comment	Type	Occurs	Date	Amount	Occurrences	Change	Step
Initial deposit	outflow	once	1-1-2004	1,000
Savings	outflow	annually	1-1-2004	100	25	3 (percentage)	1
Withdrawals	inflow	annually	1-1-2029	1	15	2 (percentage)	1

Enter 4 into the rate field and select annual compounding. Make sure that auto update is checked.

You'll find the anwser in the multiplication value field: $655.67.

To know what this represents in today's money, see the Inflation example.