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Author: gougmonk2 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76101  
Subject: Re: Present value calculation Date: 4/2/2007 9:26 AM
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Hockeypop

Further to Peter's excellent post, it depends on risk tolerance. Fixed income, say a ladder of CDs, will allow you to sleep at night but you and your long lived wife will probably dine less on steak and champagne then on hamburger and beer. Investing in the market and achieving the long term return of about 10% will supply a larger income stream but with some corresponding sleepless nights, particularly in a down market.

I would suggest 1) using the average life expectancy tables and adding a few years to the result, the number depending on health, life style and family history. Also, 2) consider that income needs will decrease with time. At 60 one may be traveling and golfing, at 80 exercise and daily excitement might be searching for the teeth each morning. One can start out with a larger income requirement than in the final years, seems I have read this somewhere but do not recall the source. The big expense in late life is the final hospitalization. Grim thought but that's life.

Use a spreadsheet to try different scenarios of life span for you and your wife, investment returns and income needs. Adjust every couple years as your situation changes and you develop a feel for your risk tolerance.
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