Withdrawals and Compounding

WHEN SAVING FOR RETIREMENT, the combination of investment gains and regular savings can produce impressive results. But once you retire, this winning combo turns into a tug-of-war. Instead of adding savings to your portfolio, you’re making withdrawals—and your annual withdrawals will often be greater than your portfolio’s annual investment gains. The big question: How long can you sustain this losing fight before running out of money?

You can run a simple scenario at Dinkytown.net using the calculator labeled “How long will my retirement savings last?” Keep in mind that this calculator assumes you earn the same return every year. What if results vary? The big danger: You get hit with a vicious bear market early in retirement. To see how things might play out, try the calculator at FIRECalc.com.

Next: Investment Costs

Previous: Present vs. Future Value

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