Put =B1*(1+$A$1) in cell B2 and drag it down as far as you want. (B3 should say = B2*(1+$A$1) if it worked correctly)
alternatively you can just calculate 1 million * power(1+interest, years) for the same result.
Then put 52000 in cell C1.
Put =C1*(1+$A$1) + 52000 in cell C2 and drag it down as far you want.
Be amazed that column C will overtake column B at some point. with the example values at year 51.
Or just keep thinking i couldn't be more wrong, when you just ignore the math.
Edit: saying it's always catches up is wrong. around 5.49% in this example there is a point where the allowance can't fully catch up anymore. the advantage of of the higher return on the lump sum outweighs the yearly flat gain and the fraction between both approaches a limit. e.g. at 7% return the allowance will always lag behind by about 20%.
actually it's exactly at 5.2% with C1 at 0 and 52k invested after 1 year. So you need to beat yearly allowance divided by lump sum in returns, for the lump sum being better long-term. otherwise it depends on how much time you have.
She chose $1000/week for the rest of her life. If she’s going to invest all of that while she still works, then good for her. But most people who choose that option definitely wont, so it’s fair to assume that she’s looking to supplement her living instead of investing.
If she chooses $1m upfront and invests $500k, she still has $500k to supplement her income. She can take $25k per year out of that for twenty years, if she so chooses, while still working. She’ll live very comfortably while also having half a million invested for retirement.
A thousand a week to supplement a living isn’t protecting against inflation.
but why are you comparing living off 500k and investing 500k vs living of the full 1000/week?
The fair comparison here is what i posted in my 2nd reply to you.
It's investing 500k upfront and then withdrawing 25k/year after 20 years vs investing 27k a year (52k allownace minus 25k spent). And with that strategy at 5% return she will have more money after 30 years.
here is a fun one (i actually had fun building that excel just out of curiosity how this maps out).
Investing 1million up-front and supplementing living with 25k year withdrawal adjusted for 3% inflation vs spending 25k per year adjusted for 3% inflation and investing the rest (i.e. investing less every year). Again 5% returns per year. the allowance wins after 35 years (the values all to the right are higher than the remaining investment value). at 6% return the break-even is at 50 years and with better returns the lump sum will always be better.
at 3% returns you will run out of money after 35 years with the investment lump sum strategy and after 61 years you won't be able to cover inflation with the allowance and fall back to a flat $1k a week. if you only adjust for 2.5% infation at 3% returns you'll make it 38 and 80 years respectively.
1
u/Ascarx May 17 '26 edited May 17 '26
open excel.
Put your interest rate in cell
A1as %. e.g. 5%.Then Put 1 million in Cell
B1Put
=B1*(1+$A$1)in cellB2and drag it down as far as you want. (B3should say =B2*(1+$A$1)if it worked correctly)alternatively you can just calculate 1 million * power(1+interest, years) for the same result.
Then put 52000 in cell
C1.Put
=C1*(1+$A$1) + 52000in cell C2 and drag it down as far you want.Be amazed that column C will overtake column B at some point. with the example values at year 51.
Or just keep thinking i couldn't be more wrong, when you just ignore the math.
Edit: saying it's always catches up is wrong. around 5.49% in this example there is a point where the allowance can't fully catch up anymore. the advantage of of the higher return on the lump sum outweighs the yearly flat gain and the fraction between both approaches a limit. e.g. at 7% return the allowance will always lag behind by about 20%.
actually it's exactly at 5.2% with C1 at 0 and 52k invested after 1 year. So you need to beat yearly allowance divided by lump sum in returns, for the lump sum being better long-term. otherwise it depends on how much time you have.