The formula to calculate the Withdrawal Rate (WR) is:
\[ WR = \left( \frac{WD}{P} \right) \times 100 \]
Where:
A withdrawal rate refers to the percentage of savings or investment balance that a person takes out annually. It is commonly used in retirement planning to ensure that the retiree's savings last throughout their retirement years. The rate is typically calculated based on various factors such as life expectancy, expected rate of return on investments, and desired lifestyle. A sustainable withdrawal rate is designed to minimize the risk of depleting one's savings prematurely.
Let's assume the following values:
Using the formula to calculate the Withdrawal Rate (WR):
\[ WR = \left( \frac{10000}{200000} \right) \times 100 = 5\% \]
The Withdrawal Rate (WR) is 5%.