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?
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.
