If Barb wants $5,000 monthly for 25 years and earns 7% return, how much does she need initially without inflation?

To determine how much Barb needs initially to receive $5,000 each month for 25 years with an investment return of 7%, we can apply the present value of annuity formula. The present value of an annuity calculates how much needs to be invested today to provide a series of future cash flows.

In this case, we have:

• Monthly payment (PMT): $5,000
• Total number of payments (n): 25 years * 12 months/year = 300 months
• Monthly interest rate (r): Annual rate of 7% divided by 12 months = 0.07 / 12 = 0.0058333

The formula for the present value of annuity is as follows:

PV = PMT × [(1 - (1 + r)^(-n)) / r]

Substituting the values into the formula:

PV = 5,000 × [(1 - (1 + 0.0058333)^(-300)) / 0.0058333]

Calculating this yields approximately $700,000. This means that if Barb invests around $700,000 today at a 7% return, she will be able to withdraw $5,000 every month for