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Investment Formula With Withdrawals:
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The investment formula with withdrawals calculates the future value of an investment that earns compound interest while making regular withdrawals. It accounts for both the growth of the initial investment and the impact of periodic withdrawals.
The calculator uses the following formula:
Where:
Explanation: The first part calculates compound growth of the principal, while the second part accounts for the withdrawals and their lost growth potential.
Details: Understanding the future value of investments with withdrawals helps in retirement planning, trust fund management, and any scenario where you need to balance growth with periodic distributions.
Tips: Enter the initial investment amount, annual interest rate (as percentage), investment period in years, and annual withdrawal amount. All values must be positive numbers.
Q1: What happens if withdrawals exceed investment growth?
A: The future value will decrease over time and may eventually become negative, indicating the investment is being depleted.
Q2: How does this differ from regular compound interest?
A: Regular compound interest assumes no withdrawals. This formula accounts for the negative impact of withdrawals on growth.
Q3: Can I use this for monthly withdrawals?
A: For monthly withdrawals, you would need to adjust the rate and number of periods to monthly equivalents.
Q4: What's the safe withdrawal rate to maintain principal?
A: Generally, withdrawing less than the annual growth rate will maintain or grow the principal.
Q5: Does this account for taxes or fees?
A: No, this is a mathematical model. Actual results may differ due to taxes, fees, or changing rates.