Calculate How Much You Can Spend in Retirement with Excel: A Step-by-Step Guide
@MattMacarty
*How long will your retirement savings last?* In this final tutorial, we use two of Excel's most powerful financial functions, *NPER* and **PMT**, to build a robust model for retirement planning.
Learn to estimate how long your nest egg will last based on key assumptions for *retirement planning**. This video guides you through a simple **withdrawal strategy**, using the popular **4 percent rule* to project your *retirement income* and help determine if you *can you afford to retire**. Get essential insights and **finance advice* for your future.
Using a $1,000,000 nest egg and a conservative 4% annual return, you will learn to:
1. Use *NPER* to calculate the exact number of years your money will last given a specific annual or monthly withdrawal amount.
2. Use *PMT* to determine the maximum safe annual or monthly withdrawal you can make to ensure your money lasts for a target period (e.g., 25 years).
This is an essential skill for personal finance and building reliable retirement models.
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⏱️ Video Chapters / Timestamps
0:00 - Introduction: Estimating how long a retirement nest egg will last
0:12 - Setting up the Base Case: Earning 4% on $1,000,000
0:45 - The Goal: Using NPER and PMT for higher withdrawal or target longevity
1:34 - *Scenario 1: Using NPER to estimate longevity (Annual Withdrawal)*
1:50 - NPER Inputs: Rate, Payment (Withdrawal), and Negative Present Value
2:47 - Adjusting the *NPER formula for Monthly Withdrawals*
3:26 - Analyzing the difference between Annual vs. Monthly withdrawal periods
3:35 - *Scenario 2: Using PMT to estimate maximum safe withdrawal (Target Longevity)*
3:49 - PMT Inputs: Target Rate, 25-Year Period, and Present Value
4:21 - *Adjusting the PMT formula for Monthly Withdrawals*
4:48 - Comparing the annual result to the monthly withdrawal calculation
5:06 - Conclusion
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🔎 Summary of Skills Learned
*Excel Financial Functions:* Apply the *`NPER`* (Number of Periods) and *`PMT`* (Payment) functions to retirement assets (treating a nest egg as a loan in reverse).
*Financial Modeling:* Build two core models:
Longevity Model: Calculate life expectancy of savings (using NPER).
Safe Withdrawal Model: Calculate maximum safe annual/monthly spending (using PMT).
*Data Conversion:* Correctly adjust annual rates and periods to their *monthly equivalents* for accurate, real-world spending analysis [0:02:47].
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