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Not taking into account taxes....

If you start with 1.25 million and
spend $40,000 (3.2% of initial capital) and
inflation is 5% and
the portfolio yields 7%
You can live off it for 50 years

If inflation drops to 4% you can live off it forever.

If inflation is 5% and the port yields 5% then you run out of money in 32 years.

If your starting capital is $2 million, inflation 5%, and yield also 5%, your portfolio is good for 50 years.

I don't know how much in interest and dividends people expect to get from a portfolio but I doubt you can get 7%. Unless the initial capital is considerably larger you must also rely on capital gains. Making a spreadsheet like the following is very easy and highly reveling.


Inflation 5%
Year Capital Expense Yield Total
7%

1 1,250,000 40,000 87,500 1,297,500
2 1,297,500 42,000 90,825 1,346,325
3 1,346,325 44,100 94,243 1,396,468
4 1,396,468 46,305 97,753 1,447,916
5 1,447,916 48,620 101,354 1,500,650
6 1,500,650 51,051 105,046 1,554,645
7 1,554,645 53,604 108,825 1,609,866
8 1,609,866 56,284 112,691 1,666,273
9 1,666,273 59,098 116,639 1,723,814
10 1,723,814 62,053 120,667 1,782,428
11 1,782,428 65,156 124,770 1,842,042
12 1,842,042 68,414 128,943 1,902,571
13 1,902,571 71,835 133,180 1,963,916
14 1,963,916 75,427 137,474 2,025,963
15 2,025,963 79,198 141,817 2,088,582
16 2,088,582 83,158 146,201 2,151,625
17 2,151,625 87,316 150,614 2,214,923
18 2,214,923 91,682 155,045 2,278,286
19 2,278,286 96,266 159,480 2,341,500
20 2,341,500 101,079 163,905 2,404,326
21 2,404,326 106,133 168,303 2,466,496
22 2,466,496 111,440 172,655 2,527,711
23 2,527,711 117,012 176,940 2,587,639
24 2,587,639 122,863 181,135 2,645,911
25 2,645,911 129,006 185,214 2,702,119
26 2,702,119 135,456 189,148 2,755,811
27 2,755,811 142,229 192,907 2,806,489
28 2,806,489 149,340 196,454 2,853,603
29 2,853,603 156,807 199,752 2,896,548
30 2,896,548 164,647 202,758 2,934,659
31 2,934,659 172,879 205,426 2,967,206
32 2,967,206 181,523 207,704 2,993,387
33 2,993,387 190,599 209,537 3,012,325
34 3,012,325 200,129 210,863 3,023,059
35 3,023,059 210,135 211,614 3,024,538
36 3,024,538 220,642 211,718 3,015,614
37 3,015,614 231,674 211,093 2,995,033
38 2,995,033 243,258 209,652 2,961,427
39 2,961,427 255,421 207,300 2,913,306
40 2,913,306 268,192 203,931 2,849,045
41 2,849,045 281,602 199,433 2,766,876
42 2,766,876 295,682 193,681 2,664,875
43 2,664,875 310,466 186,541 2,540,950
44 2,540,950 325,989 177,867 2,392,828
45 2,392,828 342,288 167,498 2,218,038
46 2,218,038 359,402 155,263 2,013,899
47 2,013,899 377,372 140,973 1,777,500
48 1,777,500 396,241 124,425 1,505,684
49 1,505,684 416,053 105,398 1,195,029
50 1,195,029 436,856 83,652 841,825


Denny Schlesinger
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