Savings Withdrawal Rate Calculator
How Long Will Your Money Last?
One of the most critical questions in retirement planning or financial independence (FIRE) is determining a safe withdrawal rate. This calculator helps you understand the relationship between your total savings, your spending needs, and market conditions to estimate how long your portfolio will sustain your lifestyle.
Understanding the Inputs
- Total Savings Portfolio: This represents the current value of your invested assets (stocks, bonds, cash) designated for retirement or living expenses. Do not include equity in your primary residence unless you plan to sell it.
- Annual Withdrawal Amount: The amount of money you need to pull from your portfolio in the first year to cover expenses. The calculator assumes this amount increases annually based on the inflation rate entered.
- Annual Investment Return: The average percentage your investments are expected to grow each year. A common conservative estimate for a balanced portfolio is often between 5% and 7%.
- Annual Inflation Rate: The rate at which the cost of goods rises. Your withdrawal amount is adjusted upward by this percentage every year to maintain your purchasing power.
The 4% Rule and Safe Withdrawal Rates
The "4% Rule" is a popular rule of thumb suggesting that retirees can safely withdraw 4% of their initial portfolio value in the first year of retirement, followed by inflation-adjusted withdrawals in subsequent years, with a high probability of the money lasting 30 years.
However, this rule depends heavily on market performance and your time horizon. If you plan to retire early (e.g., for 40 or 50 years), a 4% withdrawal rate might be too aggressive. Many early retirees aim for a withdrawal rate between 3.0% and 3.5% to ensure their portfolio survives extended periods of market volatility.
Interpreting Your Results
Initial Withdrawal Rate: This is simply your first year's withdrawal divided by your total portfolio. If this number is above 5%, you run a significantly higher risk of depleting your savings quickly.
Time Until Depletion: This indicates how many years your savings will last given the specific return and inflation assumptions. If the result is "Indefinite," your portfolio's growth exceeds your withdrawals, theoretically preserving your capital forever.