Details

A change in the "annual withdrawal increase" applies the selected fractional increase to the value set by the "initial annual withdrawal ($000s)". For example, if the initial annual withdrawal is set at $1000 and the annual withdrawal increase is set at 0.05 (to counter the effects of inflation, say), then the annual withdrawal for the second year will be $1000 x 1.05 = $1050. The annual withdrawal for the third year will be $1050 x 1.05 = $1102.50 and so on.

Here is an equation:

,

where is the annual return as a fractional value, is the annual fractional increase in the withdrawal, and is the chosen initial annual withdrawal rate.

This Demonstration solves the above differential equation over a settable range of years, up to 30 years. When the constant annual withdrawal exceeds the investment return, the value of the fund declines over time. In this situation, the "value ($K)" column of the table may turn negative. In this case, the fund has been exhausted and the additional rows and columns of the table are not meaningful.