"You have not said how much income your mother needs as a percentage of total investments. There have been many posts regarding research that shows that if you want your investments to last during retirement (25+ years), you should not cash in more than 5%/year. However, in your mothers case, assuming she doesn't care to leave an inheritance, that percentage can be pushed higher."

I have seen these suggestions and the fact is that they are guidelines that probably should be explained so others understand what the 5% cashout implies.

5% or any set percent works at keeping capital intact ONLY if the withdrawal percentage is less than the actual return of the investment.

5% will not work if the realized returns actually received comes to 4.9% over the time period of the withdrawals.

If one expects and feels comfortable that their investments will match the S&P over a 15 year period and the S&P does for example 11% (history repeats) then a withdrawal rate of 10.9% over that period will leave the investment value a bit above it's starting point.

The rub comes when the estimated return for the investment is 11% over the long haul, the withdrawals made are 10.9% and the actual return for the period is 8%. In this case, the capital will be eroded.

I liked the concept put forth of setting up funds for immediate needs, short term needs, and long term returns. By setting a more reasonable long term expected return with a heavily weighted equity position and a conservative withdrawal rate, one can cashout equity to meet the withdrawal rate needed yet have a cushion for those years when the withdrawal rate exceeds the actual return.

If the historic expected value of 11% is reduced to 9% and a withdrawal rate of 8% is used, the capital investment should grow over a period of 10 to 12 years. This is true as long as the long term realized rate of return meets or exceeds the conservative estimate of 9%. Capital will be preserved if the realized returns meets or exceeds the 8% withdrawal rate over the withdrawal period.

I have not done the calculations but I believe that inflation can be factored into this process and the capital can still grow.

I'll play with some historic data and see what I can come up with....

" Check out http://www.financialengines.com/ for calculations that will tell you how much."

I have done so but the system assumes a conservative CD fixed rate of return after retirement. I believe that is unrealistic and too conservative for my blood
- and lifestyle...

BGP