It works like this...During the course of the year your 600k earns 36k, you withdraw 24k and 12k, stays in the fund. For year 2 you earn 6% on 612k (36,720), withdraw 24,720, and 12k stays in the fund, etc.

Let's say I have $600,000 for a 30 year retirement. I withdraw 4% per year and earn an average of 6% each year from investments. Inflation is 3%. How do I adjust for inflation so my purchasing power never goes down?

4% of $600k is $24k. And 3% of that is $720. Would I have to put that $720 into the principal and then withdraw $24,720 the next year and repeat? I'm not sure how much this hypothetical retirement would last if that were the case.