Yes.grok87 wrote: ↑Thu Jun 01, 2023 7:16 amreally?Ben Mathew wrote: ↑Wed May 31, 2023 6:08 pm If life expectancy did not change, spending would grow at the portfolio rate of return. Since life expectancy increases each year, spending grows slower than the portfolio rate of return.
When portfolio growth rate (r) = spending growth rate (g), amoritization becomes 1/ number of years left.
So if there are 30 years left, withdrawal rate is 1/30=3.33%.
If the portfolio balance is $1 million, then withdrawal is 3.33% of $1 million = $33,333
Remaining portfolio balance is $1 million - $33,333 = $966,677
Suppose portfolio growth rate (r) is 5%.
Then portfolio balance at start of the following year is $966,677*1.05 = $1,015,000
The following year, if life expectancy is not updated upwards, there will be 30-1 = 29 years left.
Withdrawal rate will be 1/29 = 3.45%
Withdrawal amount = 3.45% * $1,015,000 = $35,000
Spending growth (g) = $35,000/$33,333-1 = 5%, same as portfolio growth (r).
If, instead, life expectancy is updated upwards each year as the RMD calculations do, there will be more than 29 years left. So withdrawal rate will be less than 3.45%, withdrawal amount will be less than $35,000, and spending growth (g) will be less than 5% and so less than the portfolio rate of return (r).