Hi All,
I would like to build a personal financial model that will let me maximize lifetime consumption/spend. I understand this to be an optimization problem, but I have no clue about the mathematics involved to solve such problem. Hoping someone can guide me towards the right direction.
Variables:
Start Year = 2020, Start Age = 35, Death Age = 2070, Death Age = 85, Income (age 35 to 64) = $80K (no inflation), Retirement Income (age 65 and after) = $15K, Fixed Rate of Return = 7%, Starting Net Worth (in 2020) = $50K
Formulas:
Return = Net Worth x Fixed Rate of Return (7%)
Savings (Withdrawal) = Return + Income - Consumption
Current Year Net Worth = Previous Year's Net Worth + Previous Year's Net Savings / Withdrawal
Question:
How do I optimize the rate of consumption each year such that I can maximize total lifetime consumption?
The minimum consumption cannot go below $50K. No limit on the maximum. Net Worth can never dip below $0.
The best that I've been able to come up with is total lifetime consumption of $5.67 million. I used a very basic, brute force approach by trying different scenarios only to end up with starting consumption at $50K in the first year and then inflating it by 2.89% each year such that the ending balance is still $15K (the closest I've been able to keep it above $0.)
Link to Googe Sheet with the above scenario.
Thanks in advance.
[link] [comments]
from math https://ift.tt/2GBFX6U
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