EXAMPLE 4 Using Up Retirement Savings

Suppose that you begin retirement with $1 million in savings, and you don’t trust banks or the stock market, so you keep it all under your mattress. Suppose it costs you $50,000 per year to live at your accustomed standard of living and there is no inflation. How long will your retirement nest egg last? How long will it last if inflation is constant at 2.35%, the average annual inflation over the past 20 years from 1995 to 2015?

The static reserve is . With inflation, it will cost you increasingly more per year to live, so you should realize that your savings will last only for the length of the exponential reserve, which is

You have a fine strategy if you expect to live just about 17 more years and plan to I die broke!