Asking for a financial calculation/estimate -- how long until I'm out of money?

[Anonymous]

One for the quants. I don't want to go into the background, but I'd be grateful for someone to do the calculation/estimate.

Here's the problem: $1.3 million today, 70% in total stock market index fund, 30% in a total bond market index fund (Vanguard for both). Selling ("withdrawing") $7000 a month for cost of living.

How many years until I run out of money?

[Anonymous]

It depends on what happens to the stock market.

[Anonymous]

About 25 years assuming 6% return and that you won't increase the withdrawals (which I think is unlikely), plus 25% tax bracket.

[Anonymous]

Anonymous wrote:About 25 years assuming 6% return and that you won't increase the withdrawals (which I think is unlikely), plus 25% tax bracket.

About 20 years if you increase withdrawals by 2%/year

[Anonymous]

If you make a 5% annual return it will last 30 years.
If you make a 2% annual return it will last 20.
If you make 6.5% annual return it will last forever.

[Anonymous]

Anonymous wrote:It depends on what happens to the stock market.

OP here. I know, but I want a knowledgeable person to make assumptions.

[Anonymous]

Anonymous wrote:If you make a 5% annual return it will last 30 years.
If you make a 2% annual return it will last 20.
If you make 6.5% annual return it will last forever.

You must have assumed no taxes?

[Anonymous]

Anonymous wrote:One for the quants. I don't want to go into the background, but I'd be grateful for someone to do the calculation/estimate.

Here's the problem: $1.3 million today, 70% in total stock market index fund, 30% in a total bond market index fund (Vanguard for both). Selling ("withdrawing") $7000 a month for cost of living.

How many years until I run out of money?

I wouldn't spend $7K a month if I was trying to make $1.3M in savings last. That is $84,000 a year!

[Anonymous]

Anonymous wrote:

Anonymous wrote:It depends on what happens to the stock market.

OP here. I know, but I want a knowledgeable person to make assumptions.

I'm not sure that I am "knowledgeable" but having 70% of your assets in stocks means that it will be very hard to predict how long your money will last. Because the market has huge short-term variations. That is why most people put most of their assets in bonds at retirement.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It depends on what happens to the stock market.

OP here. I know, but I want a knowledgeable person to make assumptions.

I'm not sure that I am "knowledgeable" but having 70% of your assets in stocks means that it will be very hard to predict how long your money will last. Because the market has huge short-term variations. That is why most people put most of their assets in bonds at retirement.

Given that, what would be an average rate of stock market return that could be used as an imperfect assumption?

[Anonymous]

3-4% real returns

[Anonymous]

Anonymous wrote:

Anonymous wrote:If you make a 5% annual return it will last 30 years.
If you make a 2% annual return it will last 20.
If you make 6.5% annual return it will last forever.

You must have assumed no taxes?

Correct. We have no basis for making any assumption about taxes.

[Anonymous]

OP, find a website with Monte Carlo simulations--I think Vanguard's website does this. MC sims are considered the best estimators because they run a zillion different possible scenarios and then give you the percentage likelihood that your money will last X number of years.

[Anonymous]

http://www.firecalc.com/

[Anonymous]

If you can reduce your draw down even a few thousand in years where markets are down, everything will work out. Plenty of recent studies support this for your inputs.