Personal Finance - How long will Capital last when I retire
Originally published: 23/08/2021 09:18
Last version published: 25/08/2021 10:35
Publication number: ELQ-34875-2
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Personal Finance - How long will Capital last when I retire

Model to calculate how long you can live off your capital

Description
Yesterday, I was wondering how much I needed to have on the bank to make sure that I could live a peaceful retirement. This simple model is there to answer this exact question.

It will require to input an amount of Capital available, an average target Rate of Return (ie. how much % you earn per year off this capital), a tax rate on the interest and return your earn each year to calculate your net income from your capital.
It will also require that you input an average passive income (not related to any investment) if you have one.
Finally, it will ask what is your annual budget and to choose an input for the average inflation % in the future.

What the model does, based on these input, is to calculate how long you can live off your capital, under the assumption that for each year that what you earn is lower than your annual expense, the extra amount is reduced from your capital.

With this tool I hope that you can check the effect of managing your annual expense and that it will help you assess how much cash you need to have in the bank to plan for your retirement.

This Best Practice includes
1 Excel File

Pierre-Alexandre HEURTEBIZE offers you this Best Practice for free!

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Further information

Help plan for retirement and understand the impact of your cost of living on how long you can last off your existing capital


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