Retirement Income Calculator: How Long Will Your Savings Last?
Retirement Drawdown Calculator: The 4% Rule Explained
The 4% rule is a widely discussed guideline for retirement withdrawals. It suggests that you can withdraw 4% of your initial portfolio value in your first year of retirement, then adjust that dollar amount for inflation every year thereafter, with a high probability that your money will last for a 30-year retirement.
However, the 4% rule isn't perfect for everyone. If you retire early and need your money to last 40 or 50 years, a 4% withdrawal rate might be too aggressive. Testing your specific numbers using our retirement income calculator helps you visualize how different withdrawal rates, inflation, and market returns impact your portfolio's longevity.
Frequently Asked Questions
What is a retirement income calculator?
A retirement income calculator is a tool that projects how your savings and investments will perform over time when you start taking regular withdrawals. It accounts for market returns and inflation to estimate when your money might run out.
How long will my retirement savings last?
How long your retirement savings last depends on your starting portfolio size, your annual withdrawal amount, the inflation rate, and your investment returns. Using a Monte Carlo simulation can help provide a statistical probability of success, factoring in sequence of returns risk.
How do I use a retirement drawdown calculator?
To use a retirement drawdown calculator, input your total savings, the amount you plan to withdraw each year, and your expected rate of return and inflation. The calculator will model the drawdown phase of your retirement, showing you year-by-year balances.
Does the 4% rule work for early retirement?
The 4% rule was designed for a 30-year traditional retirement. For early retirees planning for 40 to 50 years of withdrawals, a more conservative rate like 3% to 3.5% is often recommended to reduce the risk of outliving your money due to a longer timeline and inflation risk.
What happens if inflation is higher than expected?
High inflation erodes your purchasing power, meaning you have to withdraw more money to maintain your standard of living. This increases your withdrawal rate and significantly depletes your portfolio faster. Factoring in accurate inflation estimates is crucial for any retirement plan.