Question:

How much money would you need on-hand at retirement earning 6% interest in order to get $7,000 per year?

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Need to know how to calculate answer: (N I PV PMT FV) using the financial calculator

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  1. Well, your question is basically "7000 is 6 percent of what?" so all you need to do is divide 7000 by 0.06.

    The answer is $116,667. That much in the bank at 6 percent interest will give you $7000 per year.

    I have no idea how you'd do this on a "financial calculator". I just used a piece of scrap paper and a pencil.


  2. It depends on how long you expect to live in retirement.  Generally, the math below (7000 / 0.06 = $116,000) is right assuming you don't want to touch the principal balance of your investment.  If you want to drawn down some of your investment, then you need to know how many years you want $7,000 to last.

    For example, if you are planning a 20 year retirement, the entries are:

    N=20

    i = 0.06

    PMT = 7000

    PV = answer you seek - should be approx $110,000.

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