Long-term Investment calculation

#1 11-27-2004, 10:34 PM

Mr. Meyer:

Exactly what I was looking for!
Thank you ... VERY much.

Christopher A. Steele
casteele95thbgheavy[at]yahoorambler.com
[banish 'rambler' from above to Email]

Son of Col. Marvin J. Steele
US Army Security Agency/Adj. Fts: Richardson, Devens, Rucker,
Lawton, Oakland Army Terminal, Thailand, Korea

Jesse Meyer <meyer_spammenot_[at]ideaone.net> wrote in message news:<uda2oc.i7n.ln[at]btinet.net> ...
- quote -

> Christopher A. Steele <casteele95thbgheavy[at]yahoo.com> wrote:
> > How do I calculate how much needs to be invested in one lump sum ...
> > into a fairly conservative financial tool upon my death ... such that
> > it will produce an increase in capital sufficient to keep up with
> > inflation ... while allowing a consistent amount to be withdrawn every
> > month? ( I haven't decided on the type of instrument yet.)
> If my math is correct:
> p1 = yearly inflation.
> p2 = yearly return.
> D = money taken away each month.
> M = money invested.
> D * 1200 / ( p2 - p1 ) = M
> If you figure 4% inflation a year, have returns of 6%/year, and want
> $1k a month, you need to invest:
> 1,000 * 1200 / ( 6 - 4 ) = $600k
> That formula is easy to double check:
> $600k to invest [at] 6%/year.
> Inflation is 4%/year.
> Effective return is 2%/year, which is the money you can withdraw
> without decreasing the "real" value of the money.
> That works out to $12k/year or $1k/month.
> Hope that helps.

======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding.

11-24-2004, 03:39 PM

Christopher A. Steele <casteele95thbgheavy[at]yahoo.com> wrote:
- quote -

> How do I calculate how much needs to be invested in one lump sum ...
> into a fairly conservative financial tool upon my death ... such that
> it will produce an increase in capital sufficient to keep up with
> inflation ... while allowing a consistent amount to be withdrawn every
> month? ( I haven't decided on the type of instrument yet.)

If my math is correct:

p1 = yearly inflation.
p2 = yearly return.
D = money taken away each month.
M = money invested.

D * 1200 / ( p2 - p1 ) = M

If you figure 4% inflation a year, have returns of 6%/year, and want
$1k a month, you need to invest:

1,000 * 1200 / ( 6 - 4 ) = $600k

That formula is easy to double check:

$600k to invest [at] 6%/year.
Inflation is 4%/year.
Effective return is 2%/year, which is the money you can withdraw
without decreasing the "real" value of the money.
That works out to $12k/year or $1k/month.

Hope that helps.

--
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#-1 11-23-2004, 09:15 PM

How do I calculate how much needs to be invested in one lump sum ...
into a fairly conservative financial tool upon my death ... such that
it will produce an increase in capital sufficient to keep up with
inflation ... while allowing a consistent amount to be withdrawn every
month? ( I haven't decided on the type of instrument yet.)

Christopher A. Steele

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