Best Retirement Withdrawal Calculator
Estimate how many years your savings will last based on your spending and market expectations.
How Does the Retirement Withdrawal Calculator Work?
Planning for retirement requires understanding the relationship between your nest egg, your spending habits, and the forces of inflation and market returns. This tool provides a detailed simulation of your portfolio's lifespan by adjusting your withdrawals for inflation annually and compounding your remaining balance by your expected rate of return.
The Importance of the Safe Withdrawal Rate (SWR)
The "Safe Withdrawal Rate" is the maximum percentage of your initial portfolio that you can withdraw annually (adjusted for inflation) without running out of money for at least 30 years. Traditionally, the 4% rule has been the benchmark, but modern financial planning suggests adjusting this based on current market conditions and individual life expectancy.
Key Variables Explained
- Total Retirement Savings: The current lump sum available in your 401(k), IRA, and brokerage accounts intended for retirement.
- Annual Withdrawal Amount: The amount you plan to take out in the first year of retirement to cover living expenses.
- Expected Annual Return: The average yearly growth rate of your investments (stocks, bonds, cash).
- Inflation Rate: The rate at which the cost of living increases, which dictates how much you must increase your withdrawals each year to maintain the same purchasing power.
Realistic Example
If you have $1,000,000 saved and wish to withdraw $40,000 per year (a 4% withdrawal rate) with a 6% annual return and 3% inflation, your money is projected to last indefinitely because the growth rate exceeds the combined impact of the withdrawal and inflation. However, if inflation spikes to 5%, the longevity of the portfolio may drop significantly.