Financial Escape Velocity

Photo: Lisa

Bruce Sterling wrote a book a while back that dealt with the societal fallout of what happens if/when medical advancements cross the line where people can live indefinitely. It's an interesting book that's well worth a read.

It comes to my mind whenever a range of topics come up, including retirement planning. Conversations with several people who are over 80 today have convinced me to think differently about retirement timelines than lots of folks. When they were my age, they expected to live pretty much right up to the age of 65, possibly just starting to collect on Social Security. If they lived beyond that, they'd have a few years. As a result, several of them are dealing with what happens when you plan to live off of your retirement savings for 20 years longer than you planned.

Combining those conversations with the concepts in the book had me thinking about "indefinite" retirement this weekend. I was curious what it would take *today* to live a given lifestyle indefinitely.

So, I did some math. I took annual incomes of $50,000, $75,000 and $100,000 as my basis. I was after the lump starting sum that would allow you to live at that exact same level *forever*. I used 8% interest on the big pile of money and 4% inflation. I also added the interest before drawing the annual income. Changes in any of those variables would change the outcomes.

I tested up to 10,000 with a variety of combinations. The table below shows the exact numbers that reached "escape velocity". These are the after-tax numbers you'd need to inherit, win or have in the bank today to live your lifestyle indefinitely.

Interestingly, the last dollar added generally moves the duration that the amount lasts from 400 years or so to 10,000 years. So, if you want to spend that dollar, you fall back to running out of money in 400 years. I know, you're heartbroken.

It's obviously not terribly useful for real retirement planning, but mostly as an exercise to think about what happens if you retire at 65 and live to 125. Do your 401K planning spreadsheets account for lasting 30 years? What if you live 50 more? What if they somehow cross the line?