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Subject:  Re: Burn Rate Date:  8/20/1999  4:55 PM
Author:  TMFPixy Number:  13301 of 90120

Greetings, Wayne, and welcome. You wrote:

<<I am impressed with the idea of 1 years expenses in a MMF and another 3-5 years of expenses in laddered CD's/T Bills,notes.
However,all of the scenarios discussed assume leaving a hefty estate to heirs.My situation is somewhat different and I am asking for advice from this board and it's excellant contributors.If I start with 1million and follow the above for the MMF and CD's/T Bills,notes,what burn rate can I use as a percentage for annual withdrawals so that all but about 40-50K is used up in 35 years?
Obviously this situation is somewhat unusual.If I also assume a 4% inflation rate will this help the figsures to be more conservative?What rate should I use for a return on port?9% given the stats re the S&P?
In discussing adjusting the withdrawal percentagesfor inflation,would I add or subtract the inflation percentage number from the annual withdrawal percentage?
My health/physical condition is not all that great so I am obviously concerned about this topic and the results since my primary concern is with my wife and not myself.>>

Well, there are a lotta "ifs" in your questions. IF you average 9% per year return, IF inflation averages 4% per year, IF you want the portfolio to last 35 years, and IF you want $50K left at that time, THEN you may take $56,313 dollars the first year, and then increase each succeeding year's withdrawal by 4%. At the end of 35 years there will be $50K left. BUT -- An average rate of return is far different than actual rates from year to year, so your results may vary. For that reason, you must look at your results on an annual basis to ensure you don't hit a bad patch of returns that will deplete that portfolio far faster than planned. Increasing withdrawals in times of declining returns are a sure prescription for disaster.

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