Message Font: Serif | Sans-Serif

No. of Recommendations: 0
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?
No. of Recommendations: 1
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
No. of Recommendations: 0
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?"

I also note that you have not addressed inflation when assuming \$1000/month withdrawal. With only modest inflation, \$1000/month in year 10, for example, will not come close to the purchasing power of \$1000 today.

Regards, JAFO
No. of Recommendations: 0
There are a number of calulators available at different sites that will do this for you. Check out www.piperjaffray.com/si to see if one of their calculators will meet your needs. There is a formula that you can use to do this with a spreadsheet. I will try to find it on one of my spreadsheets and post it later.

glenn
No. of Recommendations: 0
Author: SAHO Date: 12/10/00 6:33 PM Number: 26524
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?

If you have Excel, there is a function:

=NPER((8/12)%,-1000,100000)

8/12% is the monthly interest rate
-1000 is the monthly withdrawal
100000 is the starting amount