How long will your capital last ?
How long your initial capital lasts will depend on the amount of your capital that you withdraw and the rate of return on your investment.
If you use the example of an initial investment of $250,000, an withdrawal rate of 10% ($25,000 pa) and an investment return of 8% per annum, your capital would last you for 18 years.
Changing your withdrawal rate to say 14% ($35,000 pa), with the same investment return, would mean your capital would last only 10 years.
| HOW LONG WILL YOUR MONEY LAST (in years) ? |
| Nett Earning Rate |
Rate of Withdrawal of Capital |
| 6% |
7% |
8% |
9% |
10% |
11% |
12% |
13% |
14% |
15% |
16% |
| 13% |
|
|
|
|
|
|
|
|
15
|
13 |
11
|
| 12% |
|
|
|
|
|
|
|
16
|
13
|
11
|
10
|
| 11% |
|
|
|
|
|
|
18
|
14
|
12
|
10
|
9
|
| 10% |
|
|
|
|
|
19
|
15
|
13
|
11
|
10
|
9
|
| 9% |
|
|
|
|
21
|
16 |
14
|
12
|
10
|
9
|
8
|
| 8% |
|
|
|
23
|
18
|
15
|
12
|
11
|
10
|
9
|
8
|
| 7% |
|
|
26
|
19
|
16
|
13
|
11
|
10
|
9
|
8
|
7
|
| 6% |
|
29
|
21
|
17
|
14
|
12
|
11
|
9
|
8
|
8 |
7
|
| 5% |
32
|
23
|
18
|
15
|
13
|
11
|
10
|
9
|
8
|
7
|
7 |
Source: Financial Security Services Pty. Limited - June, 2005
The above results are illustrative returns only and are not indicative of any fund. Future performance of any fund is not guaranteed. The above results assume an entry/application fee of 2.0%. No allowance has been taken into account for either the eroding effects of inflation or any taxation payable.
A diversified portfolio of investments is fundamental to a sound long term strategy.
During years of good investment returns, the growth portion of your investment increases in value. This extra growth allows you to draw down on additional capital during other years, when investment returns are lower.
Not everyone wants to retire the same way. Some people see this time as a chance to go on that long overseas holiday, take up new hobbies or even become more involved with community activities.
There is no ideal financial plan which will suit everybody, as everyone's needs are different.
One thing is important - developing a sound financial plan will help provide you with the comfort and peace of mind knowing that your finances are in order.
A good financial plan is the basis of planning your secure retirement.
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