Retirement Withdrawal Rate Calculator Formula
Understand the math behind the retirement withdrawal rate calculator. Each variable explained with a worked example.
Formulas Used
Withdrawal Rate
withdrawal_pct = withdrawal_ratePortfolio Lasts
years_lasting = annual_return > 0 ? (withdrawal_rate > annual_return ? log(1 / (1 - portfolio_value * (annual_return/100) / annual_withdrawal)) / log(1 + annual_return/100) : 100) : portfolio_value / annual_withdrawalMonthly Income
monthly_income = annual_withdrawal / 12Variables
| Variable | Description | Default |
|---|---|---|
portfolio_value | Portfolio Value(USD) | 1000000 |
annual_withdrawal | Annual Withdrawal(USD) | 40000 |
annual_return | Expected Return(%) | 5 |
withdrawal_rate | Derived value= annual_withdrawal / portfolio_value * 100 | calculated |
monthly_return | Derived value= annual_return / 12 / 100 | calculated |
monthly_withdrawal | Derived value= annual_withdrawal / 12 | calculated |
How It Works
Withdrawal Rate Analysis
Withdrawal Rate = Annual Withdrawal / Portfolio Value
Safe Withdrawal Rates
The famous 4% rule is based on research showing a 4% initial withdrawal (adjusted for inflation) has historically survived 30-year periods.
Worked Example
$1,000,000 portfolio, $40,000/year withdrawal, 5% return.
- 01Withdrawal rate = $40,000 / $1,000,000 = 4.00%
- 02At 5% return and 4% withdrawal, portfolio theoretically lasts indefinitely
- 03Monthly income = $40,000 / 12 = $3,333
Frequently Asked Questions
What is a safe withdrawal rate?
The 4% rule is the most cited guideline. Recent research suggests 3.5-4.5% depending on market conditions, asset allocation, and retirement length.
Does the 4% rule still work?
The 4% rule was developed based on historical US market data. With current lower expected returns, some experts suggest 3-3.5% for longer retirements.
Should I adjust withdrawals for inflation?
Yes. Most retirement planning assumes you increase withdrawals annually by inflation (2-3%). This maintains your purchasing power over time.
Ready to run the numbers?
Open Retirement Withdrawal Rate Calculator