Expert: Steve Holleran - 2/23/2007

Question
Hi
   I have been reading a book on retirement. It has a chart which shows how long your nest egg will last given your % withdrawal rate, % return and the inflation rate. it looks like this:

3% Inflation for withdrawal amount

Withdrawal %                                                       Rate of return
                                            1%       2%       3% ...................
12%                                      7 yrs     8          8
11 %
10 %
etc
                     
What formula is being used to find the 7?


Answer
Hi Jim,

I have to be honest here, I really don't know of any one formula that would produce what you're looking for.  Do I understand your proposition correctly that the 12% is the amount of your nest egg per year that you are withdrawing from the investment?  And is the rate of return (th 1%,2%,etc.) an annualized rate, as opposed to monthly or quarterly?

Business statistics is not my strong point, as you can see, but I think there's some additional information that might be needed here.

Sorry to disappoint.  Hope you find what you are looking for.

Steve Holleran