"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
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |
BATS data provided in real-time. NYSE, NASDAQ and NYSEMKT data delayed 15 minutes.
Real-Time prices provided by BATS. Market data provided by Interactive Data.
Company fundamental data provided by Morningstar. Earnings Estimates, Analyst Ra