Date: Wed, 24 Nov 2004 10:39:42 CST
From: Jesse Meyer 
Newsgroups: misc.invest.financial-plan
Subject: Re: Long-term Investment calculation
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	MO7soEWnyGaW+iR7MjCD43ADXzpLee2fGlV6FubQwcuyVo5evefh+A==
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Christopher A. Steele  wrote:
> How do I calculate how much needs to be invested in one lump sum ...
> into a fairly conservative financial tool upon my death ... such that
> it will produce an increase in capital sufficient to keep up with
> inflation ... while allowing a consistent amount to be withdrawn every
> month? ( I haven't decided on the type of instrument yet.)

If my math is correct:

    p1 = yearly inflation.
    p2 = yearly return.
    D  = money taken away each month.
    M  = money invested.

    D * 1200  / ( p2 - p1 ) = M

If you figure 4% inflation a year, have returns of 6%/year, and want 
$1k a month, you need to invest:

    1,000 * 1200 / ( 6 - 4 ) = $600k

That formula is easy to double check:

    $600k to invest @ 6%/year.
    Inflation is 4%/year.
    Effective return is 2%/year, which is the money you can withdraw
    without decreasing the "real" value of the money.
    That works out to $12k/year or $1k/month.
    
Hope that helps.

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