Portfolio Drawdown Rate Calculator
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Portfolio Longevity
0 Years
Projected Outcome
Enter your details to see how long your savings will last.
Understanding Your Portfolio Drawdown Rate
Managing capital depletion is one of the most critical aspects of retirement planning and long-term investment strategy. Unlike a loan where you pay down a balance with a fixed term, a Drawdown Rate determines how quickly you deplete your accumulated assets based on withdrawals, investment performance, and the eroding effects of inflation.
What is a Drawdown Rate?
In the context of retirement income or pension freedom, the drawdown rate is the percentage of your total portfolio that you withdraw annually to cover living expenses. For example, if you have $500,000 invested and you withdraw $20,000 in the first year, your initial drawdown rate is 4%.
This calculator helps you determine the sustainability of your withdrawal strategy. It specifically models the "decumulation" phase of investing, where the goal is to ensure your money outlasts your needs.
The Impact of Inflation and Volatility
Simply dividing your total savings by your annual spend gives a misleading figure. This calculator accounts for two competing forces:
- Compound Growth: The interest, dividends, and capital gains your portfolio earns, which helps replenish the balance.
- Inflation: The rise in cost of living, which forces you to withdraw a larger dollar amount each year just to maintain the same purchasing power.
The 4% Rule: A famous financial rule of thumb suggests that withdrawing 4% of your portfolio in the first year, and adjusting that dollar amount for inflation in subsequent years, has historically provided a high probability of the money lasting for 30 years.
How to Interpret Your Results
The output provides an estimated "Portfolio Longevity." This is the number of years your funds will last before reaching zero.
- Sustainable (30+ Years): If your result shows 30 years or "Indefinite," your drawdown rate is likely conservative enough to support a standard retirement.
- High Risk (< 20 Years): If your portfolio is depleted in less than 20 years, you may be withdrawing funds too aggressively (a high drawdown rate) or assuming returns that are too low.
Adjusting Your Strategy
If the calculated longevity is shorter than your life expectancy, consider these adjustments:
- Reduce the Annual Withdrawal: Lowering your initial withdrawal reduces the immediate strain on the portfolio (Sequence of Returns Risk).
- Adjust Asset Allocation: shifting towards assets with higher potential returns (though this comes with higher volatility risk).
- Dynamic Withdrawals: Instead of a fixed inflation-adjusted amount, withdraw a fixed percentage of the remaining portfolio value. This guarantees the money never technically runs out, though income will fluctuate.
function calculateDrawdown() {
// 1. Get input values
var pValue = document.getElementById("portfolioValue").value;
var wAmount = document.getElementById("annualWithdrawal").value;
var gRate = document.getElementById("growthRate").value;
var iRate = document.getElementById("inflationRate").value;
// 2. Validate inputs
if (pValue === "" || wAmount === "") {
alert("Please enter both Portfolio Value and Annual Withdrawal Amount.");
return;
}
// Convert to numbers
var principal = parseFloat(pValue);
var withdrawal = parseFloat(wAmount);
var growth = parseFloat(gRate) || 0;
var inflation = parseFloat(iRate) || 0;
// Handle edge cases
if (principal <= 0) {
document.getElementById("yearsResult").innerHTML = "0 Years";
document.getElementById("initialRateResult").innerHTML = "0%";
document.getElementById("outcomeMessage").innerHTML = "No portfolio balance available.";
return;
}
if (withdrawal Withdrawal, and Growth > Inflation, it might last forever.
// However, we simulate year by year for accuracy with inflation.
while (balance > 0 && years principal * 5) {
isInfinite = true;
break;
}
}
// 5. Update UI
var yearsDisplay = document.getElementById("yearsResult");
var messageDisplay = document.getElementById("outcomeMessage");
if (years >= maxYears || isInfinite) {
yearsDisplay.innerHTML = "Indefinite
Sustainable";
messageDisplay.innerHTML = "Based on these figures, your portfolio growth exceeds your withdrawal rate. Your capital is preserved.";
messageDisplay.style.color = "#27ae60";
} else {
var badgeClass = years < 20 ? "status-danger" : (years < 30 ? "status-warning" : "status-success");
var badgeText = years < 20 ? "High Risk" : (years < 30 ? "Moderate" : "Secure");
yearsDisplay.innerHTML = years + " Years
" + badgeText + "";
if (years < 20) {
messageDisplay.innerHTML = "Warning: Your portfolio may be depleted too quickly. Consider reducing your annual withdrawal or lowering the drawdown rate.";
messageDisplay.style.color = "#c0392b";
} else {
messageDisplay.innerHTML = "You have a reasonable runway, but monitor inflation and market performance closely.";
messageDisplay.style.color = "#2c3e50";
}
}
}