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

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[quote=Anonymous][quote=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? [/quote]

Here's my unsophisticated analysis.

4% interest rate, 1.5% CPI. Will last about 20 years. The risk is that those 20 years dont play out as 'average' years, you could lose out much earlier. As others have said, monte carlo simulations are the way to go.

Assets	Expenses	Ending
0	 $1,352,000 	 $84,000 	 $1,268,000 
1	 $1,318,720 	 $85,260 	 $1,233,460 
2	 $1,282,798 	 $86,539 	 $1,196,260 
3	 $1,244,110 	 $87,837 	 $1,156,273 
4	 $1,202,524 	 $89,155 	 $1,113,369 
5	 $1,157,904 	 $90,492 	 $1,067,412 
6	 $1,110,109 	 $91,849 	 $1,018,259 
7	 $1,058,990 	 $93,227 	 $965,763 
8	 $1,004,393 	 $94,625 	 $909,768 
9	 $946,159 	 $96,045 	 $850,114 
10	 $884,119 	 $97,485 	 $786,633 
11	 $818,098 	 $98,948 	 $719,151 
12	 $747,917 	 $100,432 	 $647,485 
13	 $673,384 	 $101,938 	 $571,446 
14	 $594,304 	 $103,467 	 $490,836 
15	 $510,470 	 $105,019 	 $405,450 
16	 $421,668 	 $106,595 	 $315,073 
17	 $327,676 	 $108,194 	 $219,483 
18	 $228,262 	 $109,817 	 $118,445 
19	 $123,183 	 $111,464 	 $11,719 
20	 $12,188 	 $113,136 	 $(100,948)
[/quote]

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