Retirement fund???

[path_seeker]

Hi all.

I was looking for a formula to calculate how much a retirement fund can last.

Total fund = $300k
Annual interest = 4%
Annual usuage = 24k

How to determine how long can the fund last?

Any specific formula to get the extact years it will last?

 

[jgyy1990]

Approximately 15 years

 

[path_seeker]

Ty for yr input.

Could you share the forumla?

 

[kebinu]

Simple calculation with excel, a bit off somewhere, depending on when you want to add in inflation, when to start to have interest

Year Initial Fund Interest Fund after interest Usage Inflation Adjusted Usage Fund after usage
1 300000 1 300000 24000 1 24000 276000
2 276000 1.04 287040 24000 1 24000 263040
3 263040 1.04 273561.6 24000 1 24000 249561.6
4 249561.6 1.04 259544.064 24000 1 24000 235544.064
5 235544.064 1.04 244965.8266 24000 1 24000 220965.8266
6 220965.8266 1.04 229804.4596 24000 1 24000 205804.4596
7 205804.4596 1.04 214036.638 24000 1 24000 190036.638
8 190036.638 1.04 197638.1035 24000 1 24000 173638.1035
9 173638.1035 1.04 180583.6277 24000 1 24000 156583.6277
10 156583.6277 1.04 162846.9728 24000 1 24000 138846.9728
11 138846.9728 1.04 144400.8517 24000 1 24000 120400.8517
12 120400.8517 1.04 125216.8858 24000 1 24000 101216.8858
13 101216.8858 1.04 105265.5612 24000 1 24000 81265.56118
14 81265.56118 1.04 84516.18363 24000 1 24000 60516.18363
15 60516.18363 1.04 62936.83098 24000 1 24000 38936.83098
16 38936.83098 1.04 40494.30422 24000 1 24000 16494.30422
17 16494.30422 1.04 17154.07638 24000 1 24000 -6845.923616

 

[kebinu]

If add in inflated usage of money.

Year Initial Fund Interest Fund after interest Usage Inflation Adjusted Usage Fund after usage
1 300000 1 300000 24000 1.06 25440 274560
2 274560 1.04 285542.4 25440 1.06 26966.4 258576
3 258576 1.04 268919.04 26966.4 1.06 28584.384 240334.656
4 240334.656 1.04 249948.0422 28584.384 1.06 30299.44704 219648.5952
5 219648.5952 1.04 228434.539 30299.44704 1.06 32117.41386 196317.1251
6 196317.1251 1.04 204169.8102 32117.41386 1.06 34044.45869 170125.3515
7 170125.3515 1.04 176930.3655 34044.45869 1.06 36087.12622 140843.2393
8 140843.2393 1.04 146476.9689 36087.12622 1.06 38252.35379 108224.6151
9 108224.6151 1.04 112553.5997 38252.35379 1.06 40547.49502 72006.10467
10 72006.10467 1.04 74886.34886 40547.49502 1.06 42980.34472 31906.00414
11 31906.00414 1.04 33182.24431 42980.34472 1.06 45559.1654 -12376.92109

10 years.

 

[path_seeker]

Wow...

Ty

 

[lzydata]

Using TS's simple parameters, you can just use the Excel formula:

=NPER(4%,-24000,300000,0,0)

This will give you the number of years, about 17.7.

But if you want to consider other things such as inflation, better to work it out year by year.

 

[tiny]

The dollar sign grows smaller at twice the speed. First due to annual inflation. Second due to compounding effect.

 

[henrylbh]

Most of my retirement fund is in CPF

 

[cscs3]

The dollar sign grows smaller at twice the speed. First due to annual inflation. Second due to compounding effect.

Inflation is very subjective. "Financial" planner will use this as their selling point to sell you a financial product. In a real live, it is complicate as it is not necessary a disadvantage to you. For example, not all thing you buy is going to be more expensive by next year or months (eg, some IT products). Next, if you are already in or close to retirement. Some of your fix asset many have raised much more then inflation rate eg housing.

Sure, if you are those always looking for the latest, and luxury items. You will be always ahead and paying much more vs current inflation rate.

So it just a matter of adjusting you habit in spending. eg, if you are using a expensive smart phone with high end plan. By the time you are about to retire. A normal phone or even pre-pay card may be good enough!

 

[antonpoh]

Don't need to calculate all those. If you can get 2k passive income with 300k, you should be able to last a lifetime.

 

[henrylbh]

Don't need to calculate all those. If you can get 2k passive income with 300k, you should be able to last a lifetime.

I budget a drawdown of my assets including passive income at $3,300 pm till my demise and I still feel not enough though I am single

 

[antonpoh]

I budget a drawdown of my assets including passive income at $3,300 pm till my demise and I still feel not enough though I am single

Guess you must spend alot. I'm single and i don't spend much. I don't have 300k, and my passive income is aro $2700 right now. Should be able to pass your 3.3k by 2016.

 

[tiny]

Inflation is very subjective. "Financial" planner will use this as their selling point to sell you a financial product. In a real live, it is complicate as it is not necessary a disadvantage to you. For example, not all thing you buy is going to be more expensive by next year or months (eg, some IT products). Next, if you are already in or close to retirement. Some of your fix asset many have raised much more then inflation rate eg housing.

Sure, if you are those always looking for the latest, and luxury items. You will be always ahead and paying much more vs current inflation rate.

So it just a matter of adjusting you habit in spending. eg, if you are using a expensive smart phone with high end plan. By the time you are about to retire. A normal phone or even pre-pay card may be good enough!

Your final paragraph is insightful. Thanks!

You work in the financial sector?