Question

Step 1. 4% of Capital Balance Approach.

Use the managing retirement distributions worksheet to

calculate Faye’s annual retirement income possibilities and inheritance, using a beginning-of-the-year

withdrawal from ages 65-94 by withdrawing 4% of her capital the first year and with the remainder of

her account earning 4% annual after-tax return. Retirement income should increase by 3% annually

across retirement to keep pace with inflation. Start with a 4% withdrawal, but if it is not enough, then

reduce downward until the projections are adequate for her lifespan (i.e. start initial withdrawal at

4.0%, 3.9%, 3.8%, etc) Faye starts with 2,000,000 in her retirement account.

Answer 1