Reading through this tread, I've noticed a few people missed out on a simple point with respect to what to have in the bank against what you can withdraw each year and "still make it"... Barry hit it on the head... Interest vs Inflation...
You should be aware of the following:
When calculating what you really want/need/desire in the way of an annuity, you need to account for not only uncertainties in the way of expenditures, but also for fluctuation in the interest rates and the consumer price index, CPI (rate of inflation).
Therefore, a 3.5% interest rate does nothing for you if the CPI sits at 3.5%, as your purchasing power decreases over time.
I've included a table I banged together in 30 seconds to illustrate my point... (took me longer to write the post, so hopefully my table is correct)
Assuming $800k, 3.5% interest, 3.5% CPI, living on $43.5k per year
(fixed!), you are broke in 30 years (assuming no taxes... yea right!)
The right hand column in the actual purchasing power you have for the principal in today's dollars. What this means is that in year 10 (for example), $100 dollar will only buy the equivalent of $70 dollars worth of "stuff"... in other words, the $618k you have in the bank only can buy $433k of stuff in today's dollars. This results in you having to spend more each year if you want to maintain your "life style".
Interesting comment about the $5 coffee. In 10 years time (@ 3.5% CPI), a cup of coffee will cost $7.05
