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
| Rate | Risk Level | |---|---| | 3% | Very conservative | | 4% | Traditional safe rate | | 5% | Moderate risk | | 6%+ | Higher depletion risk |
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.
portfolio_value = 1000000annual_withdrawal = 40000annual_return = 5
- 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
Ready to run the numbers?
Open Retirement Withdrawal Rate Calculator