Overview

Main Menu Name: Fundlife

Calculates the length of time money or other assets will last given a specified rate of withdrawal and expected rate of return.

In this article:

• Background
• Why should I use this calculator?
• Getting Started
• Entering Data
• Results

Background

It is essential that the adequacy of a retirement fund or other special fund be tested. Adequacy implies that if money is withdrawn from the fund at a stated rate over a given period of time, that it will satisfy the purpose for which it was intended.

If the analysis shows that a particular rate of withdrawal is too great or the expected rate of return that replenishes the fund is too low, withdrawals may have to be reduced, or a more aggressive investment policy may have to be pursued. This calculation is not intended to represent the past or future performance of any investment.

Why should I use this calculator?

• To measure the adequacy of a fund to meet given objectives over a stated period of time.
• To determine whether or not the level of withdrawals from a fund can safely be increased within the parameters of the objective of the fund.
• To determine what level of return will increase (or decrease) the number of years the fund will last.

Getting Started

It is essential that the adequacy of a retirement fund or other special fund be tested. Adequacy implies that if money is withdrawn from the fund at a stated rate over a given period of time, that it will satisfy the purpose for which it was intended.

If the analysis shows that a particular rate of withdrawal is too great or the expected rate of return that replenishes the fund is too low, withdrawals may have to be reduced, or a more aggressive investment policy may have to be pursued.

Entering Data

1. Rate of Withdrawal:  Enter the rate of withdrawal (from 6%-20%).
2. Expected Rate of Return on Investment:  Enter the projected rate of return (5%-15%).

Note: If the Expected Rate of Return is Equal to or Greater than the rate of withdrawal, fund will last indefinitely, or increase over time.

Results

The program calculates the number of years that the fund will last.