Daisy Flowers has just retired with $650,000 in her retirement account. She woul

Question

Daisy Flowers has just retired with $650,000 in her retirement account. She would like $5,000 each month to pay her bills (and have some fun). She expects to receive a $1,500 check each month from Social Security, and will obtain the rest from her retirement account, which should earn an interest of 6 percent, compounded monthly. If she ends up living for 30 years in retirement, would she leave an inheritance for her children or will she be in debt at the time of her death? What will her kids be left with

Explanation / Answer

Daisy wants to have $5,000 each month for her spending and she gets $1,500 from social security, so she will withdraw $3,500 from her retirement account every month.

Here the number of total payments from the retirement account will be = 30 * 12 = 360 payments.

The interest rate per period will be 6%/12 = 0.5%

We have the PV of the retirement account = $650,000

N = 360

I/Y = 0.5%

PMT = -$3,500

We can solve for the FV by using a financial calculator which will tell us whether she will have excess funds or whether she will be in debt.

The FV = $398,871.24 which means 30 years after retirement she will have excess funds of $398,871.24 which means her kids will inherit that money.

If we don

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