What effect does the target distribution (spending) rate have on the amount of the distribution (the dollar payout) paid to the endowment beneficiaries in the long term?
One of the two objectives required to preserve the purchasing power of the endowment is to increase the amount of the annual distribution to endowment beneficiaries at a rate at least equal to the rate of inflation. Over the long term, a higher spending rate will produce a lower spending amount because the endowments ability to grow has been compromised by the higher spending rate. The effect the distribution (spending) rate has on the dollar payout is shown graphically in Figure E.
