Posted: July 24th, 2016

How much could he withdraw at year end from that portfolio if he wants to keep its real value intact?

Mr. Road has accumulated savings of $180,000, conservatively invested. The investments are yielding 9% interest. Mr. Road also has $12,000 in a savings account at 5% interest. He wants to keep the savings account intact for unexpected expenses or emergencies. Mr. Road s basic living expenses now average about $1,500 per month, and he plans to spend $500 per month on travel and hobbies. To maintain this planned standard of living, he will have to rely on his investment portfolio. The interest from the portfolio is $16,200 per year (9% of $180,000), or $1,350 per month. Mr. Road will also receive $750 per month in Social Security payments for the rest of his life. These payments are indexed for inflation. Mr. Road s main concern is with inflation. The inflation rate has been below 3% recently. His Social Security payments will increase with inflation, but the interest on his investment will not. What advice do you have for Mr. Road? Can he safely spend all the interest from his investment portfolio? How much could he withdraw at year end from that portfolio if he wants to keep its real value intact?