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Suppose we lived in a society without interest. At age 25, you begin putting $750 per month into a cookie jar until you retire at age 65. At age 65, you begin to withdraw $2500 per month from the cookie jar. How long will your retirement fund last?

How many years?

 Mar 27, 2018
 #1
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Well, you make things pretty simple when no interest rates are involved!!.

40 years x 12 months= 480 months

$750 x 480 =$360,000 - this is how much you will have saved in 40 years or 480 months.

$360,000 / $2,500 = 144 - months that you will be withdrawing monthly payments of $2,500 each.

144 / 12 = 12 years - that your savings of $360,000 will run out.

65 + 12 = 77 years - your age when you run out of your retirement savings.

 Mar 27, 2018
 #2
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Okay yes that makes sense now thanks for the explanation and showing each step to solve.

Guest Mar 27, 2018

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