Spending 2,000 a month in today’s money, starting 25 years from now, takes a fund of 842,353 to last 20 years. That assumes prices rise 3% a year and the fund earns 5% a year while it is spent. After 25 years of rising prices, the first month’s spending is 4,188.
The fund pays each year’s spending at the start of the year, raises it with prices every year, and reaches zero at the end of the period. Building it from nothing at an assumed 6% a year takes 1,209 a month for the 25 years before.
Three lengths of retirement
The same spending and the same assumptions in every row. Each extra five years adds less to the fund than the five before, because the fund earns more than prices rise, so spending further in the future is paid for partly by what the fund earns in the years before.
| Fund lasts (years) | Fund at the start | Saved each month to build it |
|---|---|---|
| 15 | 661,099 | 949 |
| 20 | 842,353 | 1,209 |
| 25 | 1,006,990 | 1,446 |
What the example leaves out
The rates are assumptions, not forecasts, and they are the same every year here. Pensions, state benefits, other income in retirement and taxes are left out, and any of them changes the figure. Spending for longer than the period chosen takes a larger fund.