Retirement Income Increasing by Inflation
Contents
Example #1
A client has been faithfully saving $200 per month for 25 years and earned a 6% rate of return. Their account balance is now $135,257. How much monthly income can the client receive if they anticipate a 5% rate of return over their life expectancy of 25 years?
Data Entry
Prompt |
Value |
|
Type of Fund |
Account Distributions |
|
Calculate |
Withdrawal Amount |
|
Current Account Value |
$135,257 |
|
Interest Rate |
5 |
|
% |
Number of Years |
25 |
Type of Distribution |
Level Withdrawals |
|
Distributions per Year |
12 |
|
Distributions Made at |
End of Period |
|
Final Account Value |
0 |
Result
The account will generate $781.97 per month. (Not too bad for $200 per month savings over the same period of time.)
Example #2
How much income will the account produce if the payments increase by 2.5% annually?
Data Entry
Change Type of Distributions to Annually Increase by Percent and set Annual Increase in Distribution to 2.5%.
Result
The account will produce an initial monthly income of $608.98.
Example #3
How much income will the account produce if the payments increase by 3% per year?
Data Entry
Change the Annual Increase in Distribution to 3%.
Results
The account will produce an initial monthly income of $577.48