Retirement Spending Calculator

Understanding Safe Withdrawal Rates

The 4% rule is one of the most important concepts in retirement planning. It suggests that withdrawing 4% of your portfolio in the first year of retirement, then adjusting for inflation each subsequent year, gives you a high probability (historically 95%+) of your money lasting at least 30 years.

This rule emerged from the "Trinity Study" which analyzed historical market returns. However, it's a guideline, not a guarantee. Your actual safe withdrawal rate depends on your time horizon, asset allocation, and market conditions when you retire.

How to Use This Calculator

Enter your total retirement savings and investments
Enter your planned annual spending in retirement
Set your expected investment return rate
Enter the expected inflation rate

The Withdrawal Formula

Safe Withdrawal Formula

Annual = Portfolio × Withdrawal Rate

4% Rule Withdraw 4% year 1, adjust for inflation

Real Return Nominal Return − Inflation

Choosing Your Withdrawal Rate

3% - Very conservative, likely leaves large inheritance
4% - Traditional rule, ~95% historical success rate for 30 years
5% - Aggressive, higher risk of running out of money
Flexible spending - Adjust withdrawals based on market performance

Factors That Affect Longevity

Several factors impact how long your money will last: your withdrawal rate, investment returns, inflation, sequence of returns risk (poor returns early in retirement hurt more), and whether you adjust spending in down markets. Consider working with a financial advisor for complex situations.

Frequently Asked Questions

What is the 4% rule?

The 4% rule states you can withdraw 4% of your portfolio in year one of retirement, then adjust that amount for inflation each year. Based on historical data, this approach has a 95%+ success rate of lasting 30 years with a balanced stock/bond portfolio.

Is the 4% rule still valid today?

Some experts argue 3-3.5% may be safer given current low interest rates and high stock valuations. Others maintain 4% is fine for flexible retirees who can adjust spending in down markets. The rule remains a useful starting point but shouldn't be followed blindly.

What is sequence of returns risk?

Sequence of returns risk means that poor investment returns early in retirement hurt more than poor returns later. A market crash in year 1 of retirement can permanently reduce your portfolio, while the same crash in year 20 has less impact. This is why many retirees hold more bonds early in retirement.

Should I adjust spending in down markets?

Yes, flexible spending dramatically improves portfolio longevity. Reducing withdrawals by 10-20% in years following market declines can extend your portfolio by many years. This "guardrails" approach is more realistic than fixed withdrawals and matches how most retirees actually behave.

How does inflation affect my retirement?

Inflation reduces purchasing power over time. At 3% inflation, $40,000 today equals about $24,000 in purchasing power after 20 years. This calculator accounts for inflation in its projections. Consider keeping some stocks for growth that historically outpaces inflation.