If People want to be sure something is left when People die, here’s a plan that will work for People. Harvard University’s endowment fund developed a spending guideline in 1973 to ensure a person wouldn’t prematurely run out of money. The rule assumes a balanced portfolio allocated half to stocks and half to bonds and cash equivalents. It limits the first-year withdrawal to four percent of the portfolio’s total value. Then, in each following year, increase this amount by the previous year’s rate of inflation.

Today’s computer technology makes it easy to combine this approach with one designed to deplete capital. With assumptions on inflation, rate of return, and longevity, a withdrawal schedule can be set up. Such a schedule will increase each year by their assumed rate of inflation and carry People through the specified number of years. With such a spending plan, it is imperative that People monitor their assumptions and make adjustments as required. One simple way to do this is to calculate a capital balance for each year into the future. Then, compare their actual balance to this figure.