Endowment Spending Rate Calculator

Calculate the annual spending from an institutional endowment and whether the spending rate is sustainable.

Save
$
%
%
%

Annual Spending

$2,500,000

Sustainable? (spend <= real return)0
Real Return Rate4.0 %
Net Annual Endowment Growth-$500,000

Annual Spending vs Annual Spending Rate

View formula & how it works →

How Endowment Spending Works

Endowments are designed to provide perpetual funding. The spending rate must be low enough that investment returns preserve the real (inflation-adjusted) value of the endowment.

Formula

Annual Spending = Endowment Value x Spending Rate

Sustainable if Spending Rate <= Expected Return - Inflation

Common Practice

  • Most institutions spend 4-5% annually
  • The "Yale Model" suggests 5.25% with a diversified portfolio
  • Spending above the real return rate erodes the endowment over time

    • Example Calculation

    A $50M endowment with 5% spending rate, 7% expected return, 3% inflation.

    1. 01Annual spending: $50M x 0.05 = $2,500,000
    2. 02Real return: 7% - 3% = 4%
    3. 03Spending (5%) > Real return (4%): Not sustainable long-term
    4. 04Net growth: $50M x (7 - 5 - 3)/100 = -$500,000 per year

    Frequently Asked Questions

    Related Calculators

    Per-Pupil Spending Calculator

    Calculate per-pupil costs.

    Scholarship Yield Calculator

    Track scholarship yields.

    Tuition Increase Projection

    Project tuition increases.