Compound Interest Calculator With Withdrawals

Compound Interest With Withdrawals Formula:

\[ FV = P \times (1 + r)^n - W \times \frac{(1 + r)^n - 1}{r} \]

Principal (P):

Rate Per Period (r):

(dimensionless)

Periods (n):

count

Withdrawal Per Period (W):

Future Value (FV):

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1. What is the Compound Interest With Withdrawals Formula?

The Compound Interest With Withdrawals formula calculates the future value of an investment when regular withdrawals are made from the principal. It accounts for both the compounding growth of the remaining principal and the impact of periodic withdrawals.

2. How Does the Calculator Work?

The calculator uses the formula:

\[ FV = P \times (1 + r)^n - W \times \frac{(1 + r)^n - 1}{r} \]

Where:

$ P $ — Principal amount ($)
$ r $ — Rate per period (dimensionless)
$ n $ — Number of periods (count)
$ W $ — Withdrawal per period ($)

Explanation: The first term calculates the future value of the principal without withdrawals, while the second term subtracts the future value of the withdrawal stream.

3. Importance of Future Value Calculation

Details: This calculation is crucial for retirement planning, investment strategies, and understanding how regular withdrawals impact long-term investment growth.

4. Using the Calculator

Tips: Enter principal in dollars, rate as a decimal (e.g., 0.05 for 5%), number of periods, and withdrawal amount per period. All values must be valid (principal ≥ 0, rate ≥ 0, periods > 0, withdrawal ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: What happens if withdrawals exceed investment growth?
A: The future value will decrease over time and may eventually become negative, indicating the principal is being depleted.

Q2: Can this formula handle irregular withdrawals?
A: No, this formula assumes consistent, regular withdrawals of the same amount each period.

Q3: How does compounding frequency affect the calculation?
A: The rate (r) and periods (n) must match the compounding frequency (e.g., monthly rate for monthly compounding).

Q4: What's the difference between this and regular compound interest?
A: This formula accounts for periodic withdrawals, while standard compound interest assumes no withdrawals during the investment period.

Q5: Can this be used for loan calculations?
A: Yes, with appropriate interpretation (principal as loan amount, withdrawals as payments, future value as remaining balance).