Retirement Withdrawal Calculator
Two ways to look at spending down a portfolio: the classic initial-withdrawal-rate convention (the "4% rule") that turns a nest egg into a first-year income, and a savings-runway mode that computes how many years the money lasts at a given annual spending and real return. Both are planning conventions, not guarantees.
Income from a withdrawal rate
Example: $1,000,000 at 4% → $40,000 the first year ($3,333.33/month).
Savings runway — how long the money lasts
Example: $500,000 spending $30,000/year at a 4% real return → about 28 years.
The 4% rule is a convention with a specific meaning
The initial-withdrawal-rate convention works like this: in the first year of retirement you withdraw a chosen percentage of the starting portfolio — $1,000,000 at 4% is $40,000, about $3,333.33 a month. In every later year you take the same dollar amount adjusted for inflation, not the percentage again. The 4% figure traces to William Bengen's October 1994 Journal of Financial Planning study, which back-tested US stock-and-bond portfolios against every historical retirement start date since 1926 over roughly 30-year horizons; the 1998 Trinity study (Cooley, Hubbard, and Walz, AAII Journal) extended the approach across a grid of rates, mixes, and payout periods. Both are studies of what survived history — a planning convention, not a guarantee about any future.
The runway formula, shown in full
The savings-runway mode answers a different question: spending a level W per year (in today's dollars) from a portfolio P earning a real return r, when does the balance hit zero? With growth applied first and the withdrawal at year-end, the annuity-depletion formula gives the number of years n:
n = ln( W / (W − P·r) ) / ln(1 + r) valid when W > P·r
In the worked example — $500,000 spending $30,000 a year at a 4% real return — growth
alone sustains $20,000 a year, spending exceeds that, and the formula
yields about 28 years. The two special cases are handled
exactly: when W ≤ P·r, growth covers the withdrawal and the balance
never depletes; and at r = 0 the formula degenerates to the plain division
n = P / W. Every figure here is computed by the same tested engine as the
calculators above.
What a smooth average hides
Both modes assume a single steady return, and real markets refuse to cooperate. The order of returns matters as much as their average: a bear market in the first few years of retirement — when you are selling assets to fund spending — does damage that later good years may never repair. That is sequence-of-returns risk, and it is why the historical studies behind the 4% rule found failures clustered around retirements that began just before deep downturns. Treat any single-rate answer as a midpoint, rerun it with a weaker return, and leave margin. For a month-by-month drawdown that also escalates spending with inflation, see the Retirement Calculator; once RMD age arrives, the IRS sets a floor under your withdrawals regardless of strategy — check it with the RMD Calculator.
Frequently asked questions
Where does the 4% rule come from?
From historical back-testing of US markets. Financial planner William Bengen’s 1994 study in the Journal of Financial Planning (“Determining Withdrawal Rates Using Historical Data”) found that an initial withdrawal of about 4% of a stock-and-bond portfolio, with the dollar amount adjusted for inflation each year, had survived every historical 30-year retirement in his data. The 1998 “Trinity study” by Cooley, Hubbard, and Walz at Trinity University (AAII Journal, February 1998) reached broadly similar conclusions across a grid of withdrawal rates, portfolio mixes, and payout periods.
Do I withdraw 4% of the balance every year?
No — that is the most common misreading. The convention sets the FIRST year’s withdrawal at 4% of the starting balance, then adjusts that dollar amount for inflation each year regardless of what the portfolio does. Withdrawing a fixed percentage of each year’s balance is a different strategy: it can never fully deplete the account, but your income swings with the market.
Why does the runway mode ask for a real (after-inflation) return?
Because the spending you enter is in today’s dollars. Using a real return — the nominal return minus inflation — lets the single formula hold your spending’s purchasing power constant without modeling inflation separately. If you expect 7% nominal returns and 3% inflation, enter roughly 4%. A real return can be negative in bad decades, which the calculator also accepts.
What is sequence-of-returns risk?
The danger that poor returns arrive early in retirement, while you are withdrawing. Two retirees can earn the same average return over 30 years, but the one who hits a bear market in the first few years — selling assets at depressed prices to fund spending — can run out of money while the other finishes rich. A single steady rate, like the one this calculator assumes, hides that risk entirely; it is the main reason a plan that works on paper needs margin for error.
Not financial advice: these are general educational conventions that assume a constant return and exclude taxes, fees, Social Security, and the variability of real markets. Historical survival is not a promise about the future. Values are processed locally in your browser and never transmitted. See the methodology page.