Cheesehead
Recycles dryer sheets
Let's say you start with $1 million and withdraw $30k in the first year and in that first year inflation is 2%, the second year you withdraw $30,600 ($30,000 * (1+2%)). Then repeat.. the following year... if inflation in the second year is 2.5% then the third year withdrawal is $31,365 ($30,600 * (1+2.5%)).
Regarding the balance... it is whatever it is.
While this is the way it would work in theory, as a practical matter many of us do it a bit differently.
Thanks PB4uski, You have a good way of explaining things! I never knew which came first, the chicken or the egg.
Question 1: When we talk inflation, is that just the CPI number? It seems real inflation is higher.
Question 2: The formula you use for WR considering inflation, is there an online calculator for that? How do I know if it dipped into the principle, just by adding up the totals of all accounts?
I received the paperwork from Fidelity to set up the withdrawals and it is complex, each account needs it's own form and then list every position, over two people. I do not see if there is a way to ask them to just sweep off the "cream", meaning just the cap gains, dividends, etc. If that is possible then the principle is only reduced by inflation, correct?
Thanks