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Subject:  Re: Formulae Date:  12/10/2000  8:06 PM
Author:  JAFO31 Number:  26525 of 96369

SAHO: "Does anyone know the formulae for calculating how long a total investment earning a fixed rate of interest will last if you withdraw a fixed amount each month. For example How many months will $100,000 invested at 8% last if I withdraw $1,000 each month?"

For a ballpark figure, I ran it as a loan amortization, 100k @ 8%, with $1000 monthly payments, and the answer is slightly less than 14 years (13 years, 9 months, plus approx. $341); it likely is off a little depending upon the compounding frequency for your investment. Futhermore, this answer assumes that the investment is actually returning 8% every year (actually .75%/month).

If you are using an investment that has a long-term CAGR of 8% but that is volatile, then the answer may be a much shorter period. Using average rates of return is generally acceptable when doing accumulation calculations, but it can be a disaster when calculating withdrawals. This issue has been discused ad infinitum on The Retire Early board (in Speakers' Corner) and its related Retire Early Home Page.

Regards, JAFO

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