Retirement Withdrawal Rate Calculator
Estimated Retirement Income:
Annual Withdrawal:
Monthly Income:
Note: This calculation provides a starting point based on your initial withdrawal rate before adjusting for taxes and inflation.
Understanding Your Safe Withdrawal Rate
One of the most critical decisions in financial planning is determining your Safe Withdrawal Rate (SWR). This is the percentage of your total retirement nest egg that you can withdraw each year without running out of money before the end of your life. The Retirement Withdrawal Rate Calculator helps you visualize how your total savings translate into a liveable monthly and annual budget.
The 4% Rule Explained
A common benchmark in the financial industry is the "4% Rule." Originating from the Trinity Study, this guideline suggests that if you withdraw 4% of your portfolio in the first year of retirement and adjust that amount for inflation every year thereafter, your money should last for at least 30 years. For example, if you have $1,000,000 saved, a 4% withdrawal rate provides $40,000 in the first year.
Factors Influencing Your Withdrawal Strategy
- Market Performance: Sequence of returns risk—experiencing a market crash early in retirement—can impact your long-term sustainability.
- Longevity: If you retire early (FIRE movement) or have a family history of long life, you may need a more conservative rate like 3% or 3.5%.
- Inflation: As the cost of goods rises, your withdrawal amount must increase to maintain your purchasing power.
- Asset Allocation: A portfolio heavy in stocks may support a higher withdrawal rate but comes with more volatility than a bond-heavy portfolio.
Example Calculation
If a retiree has $750,000 in a diversified portfolio and chooses a 3.5% withdrawal rate:
- Yearly Income: $750,000 × 0.035 = $26,250
- Monthly Income: $26,250 / 12 = $2,187.50
This calculator allows you to test different scenarios to ensure your retirement lifestyle matches your financial reality.