Term Certain Method
Categories: Accounting
You have a nest egg built up for retirement. You've got $1 million split among your many investments. But how much should you let yourself spend each year? You could blow it all in the next 12 months, have a wild time, and then survive on Jello and handouts until you finally keel over.
Probably not the ideal tactic. How about trying the term certain method? It involves using your life expectancy to estimate how much you can spend per year until the time you finally kick the bucket.
You're 65 years old now. Actuarial tables suggest your life expectancy sits at 19.4 more years. Lets give you the benefit of the doubt and call that 20. Divide that million bucks by 20. You can spend $50,000 a year by the term certain method. (The actual math would be a little more complicated; the money in your accounts are still earning interest, etc.)
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Finance: What is Term To Maturity?12 Views
finance a la shmoop what is term to maturity alright people well it's kind
of a lifecycle of a bond like a bond is issued or sold it has an assay a 15 year [Bond timeline appears]
duration somebody's written that money for 15 years its term to maturity when
it first was issued was 15 years but if you bought that bond nine years into it
some you know maturation process when all the hairs growing in funny places [Hairs grow out of bond]
then at that point it would have six years current maturity well what goes on
between these years interest payments and then eventually at the very end the
issuer pays back the principal to the investor who bought the bond and [Money transfers from issuer to investor]
everyone goes away happy-ish well bonds carry gradations in short medium and
long term terms to maturity like short term generally is considered one to five [Different types of bond appear]
years mid term medium term and something like that is like five to a dozen years
and long term is like up to you know thirty or even a hundred years after
that dozen or so no hard lines here they're all dotted and yeah Disney [Man discussing bonds at DisneyLand]
actually sold a hundred year bonds at one point and they are of course the
happiest bonds on earth [Disney bonds appear]