Investment Growth Calculator With Withdrawals

Investment Growth Formula:

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

Initial Amount (P):

currency units

Rate Per Period (r):

decimal

Number of Periods (k):

unitless

Withdrawal Amount Per Period (PMT):

currency units (negative)

Future Value (FV):

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1. What is the Investment Growth Formula?

The investment growth formula with withdrawals calculates the future value of an investment that grows at a periodic rate while making regular withdrawals. It helps investors understand how their investments will perform over time with periodic cash outflows.

2. How Does the Calculator Work?

The calculator uses the investment growth formula:

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

Where:

\( FV \) — Future value (currency units)
\( P \) — Initial investment amount (currency units)
\( r \) — Rate per period (decimal)
\( k \) — Number of periods (unitless)
\( PMT \) — Withdrawal amount per period (currency units, negative value)

Explanation: The formula calculates compound growth of the initial investment while accounting for regular withdrawals that affect the overall growth trajectory.

3. Importance of Future Value Calculation

Details: Calculating future value with withdrawals is essential for retirement planning, investment strategy development, and understanding how periodic cash flows impact long-term investment growth.

4. Using the Calculator

Tips: Enter initial investment amount, periodic rate as a decimal (e.g., 0.05 for 5%), number of periods, and withdrawal amount as a negative value. All values must be valid (positive amounts where appropriate).

5. Frequently Asked Questions (FAQ)

Q1: Why is the withdrawal amount entered as negative?
A: The negative sign indicates cash outflow from the investment, which reduces the future value compared to pure growth without withdrawals.

Q2: What time periods can be used?
A: The formula works for any consistent time period (months, quarters, years) as long as the rate matches the period length.

Q3: Can this formula handle irregular withdrawals?
A: No, this formula assumes consistent, regular withdrawals of the same amount each period.

Q4: What if the withdrawal rate exceeds investment growth?
A: If withdrawals exceed growth, the future value will decrease over time, potentially depleting the investment.

Q5: How does this differ from annuity calculations?
A: This formula combines both investment growth and withdrawal components, making it suitable for scenarios where both initial investment and periodic withdrawals are involved.