Lump sum calculator

spg1

Hi

I'm trying to work out how long a lump sum would last me in retirement after factoring in interest/share dividends.

eg lump sum of £100,000; £10,000 a year withdrawal; 5% (net after inflation) investment/interest gains on the remaining lump sum.

So after first year the lump sum left would be £94.5k (£100,000 minus £10,000 = £90k + 5%) and so on.


I'm guessing there must be an online calculator out there somewhere which can do this?

many thanks

SPG

Spiderham

It's very similar to a mortgage calculation except you receive the "mortgage" payment rather than pay it. On the MSE calculator, a £100k mortgage at 5% over 14 years would cost £829 per month, therefore £100k earning 5% paying out £829 per month (£9,949 pa so pretty much £10k) would last 14 years. This assumes taking money out monthly obviously.

sleepless_saver

spg1 wrote: »

eg lump sum of £100,000; £10,000 a year withdrawal; 5% (net after inflation) investment/interest gains on the remaining lump sum.

I wish I could do as well as 5% net after inflation:( .

Anyway, your calculation assumes that your lump sum will decline steadily. In practice this won't happen - some years the value of your investments will rise, other years it will fall. If you take out the same amount every year including in the bad years, then your lump sum won't last as long as the average figure suggests.

spg1

I wish I could do as well as 5% net after inflation:( .

Yes, me too! Was just for ease of calculation rather than a reflection of my investment confidence.:)

And thanks Spiderham, I should have thought of that myself.

Doesn't look like there is a web calculator for this - bit surprising as I presume there must be a lot of people who are looking to live off a lump sum (interest and capital) and will want to know roughly how long it will last. While if the lump sum is invested in the stock market obviously it could fluctuate wildly, if it was in a savings account presumably the net interest after inflation wouldn't change that much (and also could be in a fixed rate product of some sort).

sleepless_saver

This calculator lets you play around with the figures a bit, but does not take account of inflation.

Linton

Its very simple with Excel, or open office Calc. You could even program in a random return between limits each year.

Sobraon

http://firecalc.com/ is also another option.

mouse10

Have a look at this site http://tcalc.timevalue.com/, I think the retirement calculators will give you what you want