Retirement Planning: Make Your Money Last Forever

How can you ensure that your retirement savings last forever?

If you intend to have $4,000,000 invested for retirement and you can earn 5.00% per year on your investment indefinitely, how much can you withdraw each year if you want the money to last forever?

Calculating Withdrawal Amount:

To make your retirement savings last forever, you can withdraw $200,000 each year.

In order to ensure that your retirement savings last forever, it's essential to carefully calculate the amount you can withdraw annually. By following a specific formula, you can determine the sustainable withdrawal amount based on your investment and the interest rate.

The concept of perpetuity comes into play when planning for indefinite withdrawals. A perpetuity is an annuity that continues indefinitely, providing a fixed payment at regular intervals.

To calculate the withdrawal amount that allows your money to last forever, use the following formula:

Withdrawal amount = Investment amount × Interest rate

By substituting the values from your retirement plan ($4,000,000 and a 5.00% return), you can determine that withdrawing $200,000 each year will ensure that your retirement savings remain sustainable over the long term.