Uncomfortable With Draw-down Method? - 2nd Visit

http://createwealth8888.blogspot.com/2010/01/uncomfortable-with-draw-dowm-method.html

Doing the Maths for retirement without any draw-down method

For example:

We need retirement expenses of $10,000 at age 55.

Using dual portfolio strategy - Passive and Active income



Portfolio A to generate fixed passive income of $10,000 from 55 till 80 years old.

At 4% ROC, you will need 25 times the annual expenses i.e. $250,000

Portfolio B to generate active income to offset inflation from 55 till 80 years old.

See table for capital required for Portfolio B and its ROC.

Conclusion

1. With draw-down method, you can retire with 25 times your expected annual expenses at 55
2. With no draw-down method, you may need 30 - 32 times or even much more your expected annual expenses at 55 as compounding the portfolio returns at 8.7% - 7.2% through the next 25 years of Bull and Bear market cycle is not easy.