Question

Greg has just retired with an investment portfolio equal to $1 million. He plans on using the 4% capital  balance approach to retirement distributions. He also plans on distributing the amount in one lump sum at the beginning of the year. His first year, he distributes $40,000 to live on, in addition to his other income. However, the market takes a significant decline and his portfolio loses 40%. His second year, after he takes his distribution, his portfolio increases by 20%. How much can he take out in the third year if he is sticking with the 4% method? Round to the nearest thousand.  

Group of answer choices

$40,000.

$24,000.

$27,000.

$29,000.

Answer 1

Answer: C, $27,000

Explanation;

Thank you

Ans. opening Portfolio withdrawal opening portfolio 44% opening balance withdrawal Ending Portfolio after Incaesed become Year 1 $1,000,000 $40,000 Year 2 $ 576,000 $23040 $ 960,000 576,00 € (96900 -404) $ 55 2960 663552 (552960+20%) $637010 764412 (6370lot20%) Year 3 $ 663552 $26542 withdrawal in third year = $26542 Rounded e nearest thousand = $27000 ✓

Please rate if it is helpful to you