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Retirement
What is "The Safe Rate of Withdrawal?"
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[QUOTE="Jasz, post: 239646, member: 61772"] The safe rate of withdrawal represents the rate at which you can withdraw money from your savings without increasing the risk that you will outlive your money. Conceptually, the safe rate of withdrawal is a projection based on historical trends in the stock market. You can calculate the safe rate of withdrawal by finding the average inflation-adjusted return on investment for a given period, then subtracting expected inflation from this figure to obtain a real return. Next, calculate how long you intend to keep your investments in place. Finally, divide 1 by this number to determine your safe rate of withdrawal as a percentage. The safe rate of withdrawal is a term that also means the percentage of your account balance that you can remove each year without running out of money before you die. So, if you have $1,000,000 and need to live on $50,000 per year, you should withdraw 5% of your account balance each year. The principal amount of your investment. Obviously, the larger your investment principal, the higher your safe withdrawal rate will be… so long as your return rate is relatively small. [/QUOTE]
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What is "The Safe Rate of Withdrawal?"
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