Planning for early retirement—often referred to as FIRE (Financial Independence, Retire Early)—requires a much more conservative approach to money management than traditional retirement. Because your retirement horizon might span 40, 50, or even 60 years, the risk of outliving your portfolio increases significantly.
What is the Withdrawal Rate?
Your withdrawal rate is the percentage of your total investment portfolio that you withdraw in the first year of retirement to cover living expenses. In subsequent years, this dollar amount is typically adjusted for inflation to maintain your purchasing power.
For example, if you have a $1,000,000 portfolio and you withdraw $40,000 in the first year, your initial withdrawal rate is 4%.
The Famous "4% Rule" and Early Retirement
The "4% Rule," derived from the Trinity Study, suggests that a retiree can safely withdraw 4% of their portfolio annually (adjusted for inflation) for 30 years without running out of money. However, for early retirees, experts often suggest a safer withdrawal rate (SWR) closer to 3.25% to 3.5%.
Why Lower Rates for Early Retirees?
Longer Duration: The Trinity Study focused on 30-year periods. Early retirement can last 50+ years.
Sequence of Returns Risk: Experiencing a market crash in the first 5 years of a 50-year retirement is much more devastating than in a 20-year retirement.
Inflation Impact: Over half a century, inflation erodes purchasing power aggressively, requiring your portfolio to grow substantially just to keep up.
How This Calculator Works
This Early Retirement Withdrawal Rate Calculator performs a year-by-year simulation based on your inputs:
Initial Rate: Calculates the raw percentage of your portfolio used for first-year expenses.
Compound Growth: Applies your expected annual return minus investment fees to the remaining balance.
Inflation Adjustment: Increases your withdrawal amount annually to match the inflation rate entered.
Depletion Check: Simulates this process for the duration of your retirement horizon to see if the money runs out.
Key Definitions
Investment Portfolio: Liquid assets (stocks, bonds) available for withdrawal. Do not include home equity unless you plan to sell.
Investment Fees: The expense ratio of your ETFs/Mutual Funds or fees paid to a financial advisor. These directly reduce your compounding returns.
Retirement Horizon: The number of years you expect to live after quitting your job.
function calculateWithdrawalStrategy() {
// 1. Get Input Values
var portfolio = parseFloat(document.getElementById('er_portfolio').value);
var annualSpend = parseFloat(document.getElementById('er_annual_spend').value);
var roi = parseFloat(document.getElementById('er_roi').value);
var inflation = parseFloat(document.getElementById('er_inflation').value);
var years = parseFloat(document.getElementById('er_years').value);
var fees = parseFloat(document.getElementById('er_fees').value);
// 2. Validate Inputs
if (isNaN(portfolio) || isNaN(annualSpend) || isNaN(roi) || isNaN(inflation) || isNaN(years)) {
alert("Please enter valid numbers for all fields.");
return;
}
if (portfolio Net 6.9% approx
var netReturnRate = (roi – fees) / 100;
var inflationRate = inflation / 100;
for (var i = 1; i <= years; i++) {
// Logic:
// 1. Market Growth happens on the balance
// 2. Withdraw money (end of year logic or start of year? Standard Trinity usually assumes withdrawal then growth or vice versa.
// We will use: Balance grows, then withdraw. (End of year withdrawal).
// OR: Withdraw at start, remainder grows.
// Let's assume Start of Year withdrawal for conservative estimate.
// Start of year withdrawal
currentBalance = currentBalance – currentWithdrawal;
if (currentBalance <= 0) {
yearsLasted = i – 1 + (currentBalance + currentWithdrawal)/currentWithdrawal; // Fraction of year
yearsLasted = i – 1; // Integer year
currentBalance = 0;
success = false;
break;
}
// Remainder grows
currentBalance = currentBalance * (1 + netReturnRate);
// Inflation adjusts the withdrawal needed for NEXT year
currentWithdrawal = currentWithdrawal * (1 + inflationRate);
yearsLasted = i;
}
// 5. Display Results
var resultBox = document.getElementById('er_result');
var resRate = document.getElementById('res_rate');
var resYears = document.getElementById('res_years');
var resBalance = document.getElementById('res_balance');
var resVerdict = document.getElementById('res_verdict');
var resSummary = document.getElementById('res_summary');
// Initial Rate
resRate.innerHTML = initialRate.toFixed(2) + "%";
// Styling based on rate (Standard FIRE benchmarks)
if (initialRate <= 3.5) {
resRate.className = "status-safe";
} else if (initialRate <= 4.0) {
resRate.className = "status-warning";
} else {
resRate.className = "status-danger";
}
// Years Lasted
if (success) {
resYears.innerHTML = years + "+ Years (Full Duration)";
resYears.className = "status-safe";
} else {
resYears.innerHTML = yearsLasted + " Years";
resYears.className = "status-danger";
}
// Balance
resBalance.innerHTML = "$" + currentBalance.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0});
// Verdict Logic
if (success) {
resVerdict.innerHTML = "Sustainable";
resVerdict.className = "status-safe";
resSummary.innerHTML = "At a withdrawal rate of " + initialRate.toFixed(2) + "%, your portfolio is projected to survive the full " + years + " years with a remaining balance of $" + currentBalance.toLocaleString(undefined, {maximumFractionDigits:0}) + ".";
} else {
resVerdict.innerHTML = "High Risk of Depletion";
resVerdict.className = "status-danger";
resSummary.innerHTML = "At a withdrawal rate of " + initialRate.toFixed(2) + "%, your portfolio is projected to run out of money in year " + yearsLasted + ". You may need to lower expenses, increase your savings, or find higher returns.";
}
resultBox.style.display = "block";
}