Retirement

[lkwd160]

I am retired. I have a pension paying $4300.00 a month. I have $170,000.00 making 4% interest.
Will my money last?

[Philip Brewer]

Things you don't tell us that we'd need to know even to venture a guess:

1. How old you are
2. Whether you have any dependents, and their ages
3. Whether any of your pension is indexed for inflation
4. Any large expenses you can expect to face in the future

Things nobody knows, but that someone could make a prediction about:

1. How long you'll live
2. What the return on your investments will be in the future
3. What inflation will be in the future
4. Any large unexpected expenses you will face in the future

Having said that, here's what I'd do:

1) For any part of your pension that isn't indexed for inflation, skim off and add to your capital enough to earn money to replace what you've lost.

2) Augment what's left with up to 4% of your invested capital each year. (Generally, you can take about 4% of your capital each year, and expect that most years the principal will grow enough that next year's 4% will be a bit more. That assumes your portfolio is invested in a diversified portfolio. Since yours is earning 4%, it probably isn't, so you probably can't take 4% and have it grow. In fact, you probably can't take more than about 1% and have it grow. Hence "up to.")

3) Add those two amounts to whatever part of your pension is indexed for inflation, and that's how much money you have to live on. (And, since we haven't made any provisions for foreseeable large expenses (like replacing your car when it wears out), remember that you have to fund all those things out of your annual income.)

4) Plan to earn some amount of money, doing some sort of paid work, to pick up any slack between what you've got to spend and what you'd like to have to live on.

I wrote a long article on figuring out this sort of stuff in a post called How much do I need to retire, how much can I spend?