theoretical no-growth math question davidr,
My interpretation of Joe's question: the 1 Million doesn't grow with inflation, but the annual spends increase each year.
An example. For convenience, say the annual inflation rate is 2%
So in Year 1, Joe's spending is 40,000;
in Year 2, Joe's spending is (1.02)*40,000 = 40,800;
in Year 3, Joe's spending is (1.02)*40,800 = (1.02^2)*40,000 =41,616;
in Year 4, Joe's spending is (1.02)*41,616 = (1.02^3)*40,000 =42,448.32;
etc, etc
in Year 25, Joe's spending is (1.02^24)*40,000 =64,337.49.
(For those of you unfamiliar with the jargon,
2*3 means 2 times 3, and
2^3 means 2 raised to the 3rd power.)
The question then becomes: what's the sum of all the annual spends?
That is, 40,000 +(1.02)*40,000+(1.02^2)*40,000+
(1.02^3)*40,000 + ...+(1.02^24)*40,000.
If we factor out the 40,000, then this total spending is
40,000 (1 +1.02+1.02^2+1.02^3+1.02^4+ ... + 1.02^24).
You could get out a calculator to add the 25 terms in the parentheses, but ...
wait for it
wait for it
there's a formula!
1 +1.02+1.02^2+1.02^3+1.02^4+ ... + 1.02^24 =(1.02^25 -1)/.02
A calculator can handle the 25th power term, to get
(.64061)/.02 = 32.031,
so the total amount Joe needs to live on for 25 years is
40,000*32.031 = $1,281,212.
So he needs to find 281,212 more dollars to stash away under his mattress.
The final answers:
for inflation rate 2%, the total initial amount needed is $1,281,212;
for inflation rate 2.5%, the total initial amount needed is $1,366,311;
for inflation rate 3%, the total initial amount needed is $1,458,371;
for inflation rate 6%, the total initial amount needed is $2,194,581.
David
Prez want's minimum 15% corporate tax. From latest message before heading out. If this takes effect, how will Mr. Market react ? Correction coming ? All up in the air at this time.
Derf
T. Rowe Price to Buy Oak Hill for Up to $4.2 Billion “We have a vision to be the premier active investment manager in the world,” T. Rowe President Rob Sharps said in an interview. “Alternatives is an asset class that is growing rapidly” and there’s increasing interest in it from an array of investors, he said. Sharps will become chief executive officer on Jan. 1.
T. Rowe Price to Buy Oak Hill
Short Term Bonds and/or Short Duration High Yield The separate currency is a point in favor of viewing Macau bonds as different from Chinese bonds. (Puerto Rico's bonds are a different story.) On the other hand, Macau's government seems substantially subservient to mainland China, raising doubts about true economic independence.
Both HK and Macau would like to think they're not part of China.Life is rarely that simple.
[Macau's] Special Administrative Region ... uses the same political model as Hong Kong - "one country, two systems". ... But this is where the similarity between Hong Kong and Macau ends.
...
Hong Kong is now into its sixth month of protests [Dec 2019], but Macau has mainly remained silent.
"This dissent does not exist in Macau," Jason Chao, an activist and former president of the New Macau Association, a pro-democracy party, tells the BBC.
"A major difference between Hong Kong and Macau is a wish for autonomy. Hong Kong people need autonomy, freedom and rights and they are fighting for it. This does not apply to Macau. The majority of the population are pro-China."
https://www.bbc.com/news/world-asia-china-50832919Compare and contrast w/Taiwan:
Macau said Wednesday it was closing its representative office in Taiwan, following neighbouring Hong Kong which made the same move last month in protest at Taipei's support for pro-democracy activists.
...
Hong Kong and Macau abide by authoritarian China's view that democratic, self-ruled Taiwan is part of its territory and must be seized one day, by force if necessary.
...
Beijing loathes [Taiwan's President Tsai Ing-wen] because she regards Taiwan as a de facto sovereign nation and not part of "one China".
Agence France-Presse (AFP), June 16, 2021
https://www.france24.com/en/live-news/20210616-macau-follows-hong-kong-in-shuttering-taiwan-office
Short Term Bonds and/or Short Duration High Yield FWIW, in my withdrawal account, which I haven't had to use yet, I hold RPHYX as the cornerstone, about 35% of the account, but other short/ultra-short deration ETFs I use are JPST, FLRN and MINT.
Short Term Bonds and/or Short Duration High Yield It's difficult to find US vs International % exposure on M*http://portfolios.morningstar.com/fund/summary?t=HYSAX(substitute your favorite ticker for other funds)
One does need to be careful with definitions, though. Apparently M* thinks that Macau is not part of China, and on the domestic front, that Puerto Rico is not part of the United States.
% Bonds Category Avg
United States 84.79 86.17
Canada 6.18 3.44
France 2.15 1.33
Zambia 1.83 0.23
United Kingdom 1.61 1.85
Jamaica 1.14 0.19
Germany 0.76 0.67
Macao 0.42 0.25
Ireland 0.36 0.58
Puerto Rico 0.34 0.20
Short Term Bonds and/or Short Duration High Yield I use RPHYX and FPFIX for short-term bonds. Not expecting much at all - maybe 1.5% to 2% annual returns in the current interest rate environment. Better than nothing, but not by much.
I balance these steady funds with higher risk (but low duration) vehicles RCTRX and JSVIX.
Recently sold all of my MWFSX.
Short Term Bonds and/or Short Duration High Yield Following on the informative and educational thread 'Long time owner of MWTRX'...
Looking to diversify into a few other areas of Fixed Income. A few of the funds I've looked at - ASDVX, SDMAX, FATRX, HYSAX, JSDHX to name a few...I realize the PGIM Global Multi Sector and Am Century funds are comparable but the HYSAX is a different vehicle as a Short duration High Yield fund. I'm looking for some ideas and also comments on what you folks use.
It's difficult to find US vs International % exposure on M* but I've been focusing on maturity, duration, diversification among fixed income, Int'l/US exposure 3& 5 year return...not the top returning product or riskiest either.
Far Out Here’s another “Far Out” fund.
UFO has soared 43% over the past year. As the handle suggests it invests in space related technology.
From Lipper:
(UFO) seeks investment results that correspond generally to the performance of the S-Network Space Index. The Fund uses a passive investment approach and invests in its Underlying Index which tracks a portfolio of companies engaged in space-related businesses, including those companies utilizing satellite technology.
Inception April 2019
ER 0.75%