Retirement Account Withdrawal Rate Calculator
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Initial Withdrawal Rate
0.00%
Balance at Year 10
$0
Balance at Year 20
$0
Balance at Year 30
$0
function calculateWithdrawalRate() {
// Get Inputs
var portfolioStr = document.getElementById('portfolioValue').value;
var withdrawalStr = document.getElementById('annualWithdrawal').value;
var returnStr = document.getElementById('annualReturn').value;
var inflationStr = document.getElementById('inflationRate').value;
// Parse Float Values
var portfolio = parseFloat(portfolioStr);
var initialWithdrawal = parseFloat(withdrawalStr);
var annualReturn = parseFloat(returnStr);
var inflation = parseFloat(inflationStr);
// Validation
if (isNaN(portfolio) || portfolio <= 0) {
alert("Please enter a valid Portfolio Value.");
return;
}
if (isNaN(initialWithdrawal) || initialWithdrawal <= 0) {
alert("Please enter a valid Withdrawal Amount.");
return;
}
if (isNaN(annualReturn)) annualReturn = 0;
if (isNaN(inflation)) inflation = 0;
// 1. Calculate Initial Withdrawal Rate
var withdrawalRate = (initialWithdrawal / portfolio) * 100;
document.getElementById('resWithdrawalRate').innerHTML = withdrawalRate.toFixed(2) + '%';
// 2. Calculate Longevity (Iterative Approach)
var currentBalance = portfolio;
var currentWithdrawal = initialWithdrawal;
var yearsLasted = 0;
var maxYears = 100; // Cap to prevent infinite loops
var bal10 = 0, bal20 = 0, bal30 = 0;
// Loop through years
for (var i = 1; i <= maxYears; i++) {
// Apply Growth
var growthAmount = currentBalance * (annualReturn / 100);
currentBalance += growthAmount;
// Subtract Withdrawal (Withdrawals typically happen at start or throughout, simplified here as end-of-year adjustment or start)
// Convention: Growth happens, then withdrawal for the year is taken (or vice versa).
// Standard approach: Principal grows, then expenses deducted.
currentBalance -= currentWithdrawal;
// Check if depleted
if (currentBalance = 100 && currentBalance > 0) {
yearsDisplay.innerHTML = "100+ Years";
yearsDisplay.style.color = "#27ae60"; // Green
warningDisplay.innerHTML = "Portfolio is likely sustainable indefinitely.";
// If it lasted 100+ years, ensure snapshots capture the value at those marks
// Since loop finished, values are already set.
// Just ensure 30 year balance is set if it went past 30
// Note: logic inside loop handles setting bal10, bal20, bal30 if i reached those numbers.
} else {
yearsDisplay.innerHTML = yearsLasted + " Years";
if (yearsLasted < 25) {
yearsDisplay.style.color = "#c0392b"; // Red
warningDisplay.innerHTML = "Warning: High risk of depletion early in retirement.";
} else if (yearsLasted = 10) ? formatter.format(bal10) : "$0";
document.getElementById('resBalance20').innerHTML = (yearsLasted >= 20) ? formatter.format(bal20) : "$0";
document.getElementById('resBalance30').innerHTML = (yearsLasted >= 30) ? formatter.format(bal30) : "$0";
}
Understanding Your Safe Withdrawal Rate
Planning for retirement requires balancing the need for income with the necessity of preserving your capital so you don't outlive your savings. This Retirement Account Withdrawal Rate Calculator helps you simulate how long your portfolio will last based on your spending needs, investment performance, and inflation.
What is the Withdrawal Rate?
Your withdrawal rate is the percentage of your total retirement savings that you withdraw in a single year. For example, if you have $1,000,000 saved and you withdraw $40,000 in the first year, your initial withdrawal rate is 4%.
The Formula:
Withdrawal Rate = (Annual Withdrawal Amount ÷ Total Portfolio Value) × 100
The 4% Rule Explained
The "4% Rule" is a common rule of thumb in retirement planning. Originating from the Trinity Study, it suggests that withdrawing 4% of your portfolio in the first year of retirement, and subsequently adjusting that dollar amount for inflation every year thereafter, provides a high probability that your money will last for at least 30 years.
- Success Rate: historically, this rule has survived most market downturns.
- Inflation Adjustment: Crucial for maintaining purchasing power. If inflation is 3%, a $40,000 withdrawal becomes $41,200 in year two.
- Flexibility: Rigid adherence to the rule can be risky during severe bear markets. Many retirees choose a variable withdrawal rate strategy instead.
Factors That Impact Sustainability
Several variables can drastically alter the longevity of your retirement fund:
1. Sequence of Returns Risk
If the stock market crashes during the first few years of your retirement, your portfolio value drops significantly while you are still withdrawing money. This depletes your capital faster than if the crash happened later, making it difficult for the portfolio to recover even if the market bounces back. This is known as the sequence of returns risk.
2. Inflation
Inflation erodes the purchasing power of your money. While 3% inflation might seem low, over a 25 or 30-year retirement, it can double the amount of money you need to withdraw just to buy the same goods and services.
3. Investment Horizon
People are living longer. A standard retirement was often considered 20 years, but early retirees or those with longevity in their family may need to plan for 35 or 40 years. A lower withdrawal rate (e.g., 3.0% to 3.5%) is often recommended for horizons longer than 30 years.
How to Use This Calculator
Enter your current total savings and your desired annual income from those savings. Input your expected average annual investment return (a mix of stocks and bonds often yields between 4% and 7% conservatively) and an estimate for inflation. The calculator will project year-by-year balances to determine when, or if, your money will run out.