Retirement Withdrawal Rate Calculator
Calculate your sustainable annual income based on your portfolio size and withdrawal strategy.
Withdrawal Strategy Results
First Year Annual Income:
Monthly Budget (Pre-tax):
Income After 10 Years (Inflation Adjusted):
Total Withdrawn Over Horizon:
Understanding the Retirement Withdrawal Rate
A retirement withdrawal rate is the percentage of your total savings that you take out each year to cover living expenses. Finding the right "Safe Withdrawal Rate" (SWR) is the cornerstone of financial independence planning. If you withdraw too much, you risk outliving your money; if you withdraw too little, you may unnecessarily limit your lifestyle.
The 4% Rule Explained
The most famous benchmark in retirement planning is the "4% Rule." Originating from the Trinity Study, it suggests that a retiree can withdraw 4% of their initial portfolio value in the first year and adjust that dollar amount for inflation every year thereafter for a 30-year period with a high probability of success.
Key Factors Influencing Your Withdrawal Rate
- Inflation: As prices rise, your fixed withdrawal amount loses purchasing power. Most strategies involve increasing the withdrawal amount by the CPI (Consumer Price Index) percentage annually.
- Asset Allocation: A portfolio heavily weighted toward stocks may support a higher withdrawal rate but comes with higher volatility. Bonds provide stability but lower growth.
- Sequence of Returns Risk: Poor market performance in the first few years of retirement can drastically reduce the longevity of your portfolio, even if average long-term returns are good.
- Longevity: If you retire early (FIRE), you may need a lower withdrawal rate (e.g., 3% or 3.5%) to ensure the money lasts 40 or 50 years.
Example Calculation
Imagine you have a $1,200,000 portfolio and choose a 3.5% withdrawal rate. Your first-year income would be $42,000 ($3,500 per month). If inflation is 3% the following year, you would increase your withdrawal to $43,260 to maintain the same standard of living.