How Long Will My Retirement Savings Last?

Understanding the retirement savings depletion calculator — concept and principle

How long will your savings last if you withdraw a set amount every year and raise it with inflation? This calculator answers that with a simple year-by-year projection at a steady return. It also shows your initial withdrawal rate and the starting withdrawal that would make the money last exactly 30 years under the same assumptions.

How it is calculated

Each year the balance first earns the annual return r, then the year's withdrawal is taken; the withdrawal then rises by inflation i:

• Balance next year = balance × (1 + r) − withdrawal.
• Withdrawal next year = withdrawal × (1 + i).
• The count stops in the year the balance drops below zero (or after 100 years).
• Initial withdrawal rate = first withdrawal ÷ savings.
• Sustainable starting withdrawal for 30 years = B × (r − i) ÷ (1 − ((1 + i) ÷ (1 + r))^30), which also rises with inflation (if r = i it is B ÷ 30).

The principle

Your savings are drawn down like a loan in reverse: the return adds to the balance, the withdrawals take from it, and inflation makes each withdrawal larger than the last. When the withdrawal rate is well above the real return (return minus inflation), the balance shrinks faster each year. The 30-year figure comes from the present-value formula for a growing annuity: it is the starting payment whose inflation-linked stream is worth exactly your savings today.

Worked example

Default inputs: savings $800,000, withdrawal $50,000 a year, return 5%, inflation 2.5%.

1. Initial withdrawal rate: 50,000 ÷ 800,000 = 6.25%.
2. Year 1: 800,000 × 1.05 − 50,000 = $790,000; next withdrawal $51,250.
3. Year 10 ends near $605,496; year 20 near $93,276; year 21 leaves about $16,009.
4. Year 22's withdrawal cannot be covered, so the money runs out in 22 years.
5. Start lasting exactly 30 years: 800,000 × 0.025 ÷ (1 − (1.025 ÷ 1.05)³⁰) = $38,860.

How to read the result

If the number of years is shorter than your expected retirement, consider a lower withdrawal, a later retirement or other income sources. Planning to at least age 90 or 95 is common because many people live longer than the average life expectancy. Withdrawal rates around 4% have historically been considered sustainable for about 30 years in balanced portfolios; 6.25% is noticeably higher.

Common mistakes

• Using a nominal return but forgetting to raise withdrawals with inflation.
• Assuming the average return will arrive every year without losses.
• Leaving out taxes on withdrawals.
• Ignoring pensions that reduce what you need from savings.

Frequently asked questions

How long will $800,000 last at $50,000 a year?

About 22 years with a 5% return and 2.5% inflation in this model.

How can I make my savings last longer?

Lower the withdrawal, delay retirement, add guaranteed income or cut costs and fees.

Why does market volatility matter if the average is the same?

Losses early in retirement, while you are withdrawing, do more damage than the same losses later.

Sources: Bengen, W. P., "Determining Withdrawal Rates Using Historical Data", Journal of Financial Planning (1994) · Brealey, Myers and Allen, Principles of Corporate Finance (growing annuities)