Estimate the lump sum required to generate a future desired income stream using a segmented or laddered investment approach. Estimate the income stream that can be generated by a segmented or laddered hypothetical portfolio given initial lump sum. |
This screen will calculate the initial lump sum required to fund a segmented (laddered) hypothetical portfolio in order to generate an income adjusted monthly income. This is only a gross mathematical estimate since there is no way to predict actual future investment returns. Additionally, to simplify matters, the calculation does not factor in future tax rates, as they too are unpredictable. |
LUMP SUM REQUIRED TO GENERATE A SPECIFIED INCOME STREAM The solution is found with the assistance of an iterative targeting algorithm that uses the following logical approach: •The inflation adjusted monthly income stream is calculated for each distribution segment. •The beginning of distribution lump sum is determined for the beginning of each distribution segment. The present value of the distribution lump sum is calculated to provide an initial (time zero) lump sum requirement. •The initial lump sum requirement for each segment is added together to provide the total lump sum required.
MAXIMUM INCOME STREAM The solution is found by iterating the Lump Sum Required algorithm. Income estimate guesses are tried until the guess consumes the given initial lump sum over the specified timeframe. In either case, the year-by-year results are available for review and may be exported as an Excel™ worksheet. |