Year by year
$500,000.00 with $2,500.00 taken out each month, at 5% a year.
| Year | Taken out | Growth | Balance |
|---|---|---|---|
| 5 | $30,000.00 | $23,094.17 | $468,606.44 |
| 10 | $30,000.00 | $21,186.22 | $428,539.41 |
| 15 | $30,000.00 | $18,751.13 | $377,402.60 |
| 20 | $30,000.00 | $15,643.27 | $312,137.64 |
| 25 | $30,000.00 | $11,676.78 | $228,841.17 |
| 30 | $30,000.00 | $6,614.41 | $122,531.42 |
| 35 | $16,963.53 | $266.69 | $0.00 |
Long tables show every fifth year, and the Taken out and Growth columns are for that one year. The balance falls slowly at first and faster near the end, because each year there is less money left to earn a return.
Results are estimates for planning. They are not financial, tax or legal advice.
How the answer is worked out
The calculator steps through one month at a time. Each month the balance earns one month of return, then the withdrawal comes out. It stops in the month when a full withdrawal can no longer be paid, and reports whatever is left as a last, smaller withdrawal.
When the withdrawal stays the same every month, the count of months has a direct formula:
- P is your savings and W is the monthly withdrawal.
- i is the return for one month. A yearly return of 5% is a monthly rate of 1.05^(1/12) − 1 = 0.407412%, which compounds to exactly 5% over twelve months.
- If P × i is as large as W, growth covers the withdrawal and the money never runs out.
Worked examples
$500,000 with $2,500 a month at 5%
P × i = 500,000 × 0.00407412 = $2,037.06 of growth in the first month, less than the $2,500 taken out, so the balance falls. The formula gives N = −ln(1 − 2,037.06 ÷ 2,500) ÷ ln(1.00407412) = 414.79. That is 414 full withdrawals, or 34 years and 6 months, followed by a last withdrawal of $1,963.53.
No growth at all
With a 0% return there is nothing to compound, so the sum is a division. $100,000 at $1,000 a month lasts 100,000 ÷ 1,000 = 100 months, which is 8 years and 4 months.
Withdrawals that keep up with prices
$1,000,000 with $3,333.33 a month is a 4% first year. Set the yearly raise to 3% and the return to 5%: the withdrawal climbs to $3,433.33 in year two and keeps climbing, and the money lasts 34 years and 10 months. Without the raise the same withdrawal would never run out, because 5% growth on $1,000,000 is about $4,074 a month.
What changes the answer
Starting from $500,000 at a steady 5% return, with no yearly raise. The middle column is the first year's withdrawals as a share of the savings:
| Each month | Year-one share | Lasts |
|---|---|---|
| $2,000 | 4.8% | never runs out |
| $2,500 | 6.0% | 34 years 6 months |
| $3,000 | 7.2% | 23 years 3 months |
| $3,500 | 8.4% | 17 years 10 months |
| $4,000 | 9.6% | 14 years 7 months |
And the same $500,000 with $2,500 a month at different returns: 16 years 8 months at 0%, 22 years 11 months at 3%, 34 years 6 months at 5%, and no end date at 7%.
The 4% rule
The 4% rule is a way to turn savings into a yearly income that is meant to last a 30-year retirement:
- In the first year, take out 4% of what you have saved.
- Every year after, take the same dollar amount plus inflation, whatever the markets did.
It comes from financial planner William P. Bengen's article "Determining Withdrawal Rates Using Historical Data" (Journal of Financial Planning, October 1994). He tested retirements starting in every year from 1926, using a portfolio split between US stocks and intermediate-term Treasury notes, and found that a 4% start had never used up the money in less than 33 years. The "Trinity study" by Philip Cooley, Carl Hubbard and Daniel Walz ("Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable", AAII Journal, February 1998) ran a similar test on 1926 to 1995 and found that portfolios holding at least half in stocks came through nearly every 30-year period at an inflation-adjusted 4%.
Used the other way round, the rule gives a savings target. Dividing by 4% is the same as multiplying by 25:
$1,000,000 supports $40,000 in the first year, about $3,333 a month. To spend $60,000 a year from savings you would need $1,500,000.
Why the rule is more cautious than a steady return
Run a 4% first year with 3% yearly raises through this calculator and the money lasts different lengths of time depending on the steady return you assume:
| Steady return | $1,000,000 lasts |
|---|---|
| 3% | 25 years 4 months |
| 4% | 29 years 1 month |
| 5% | 34 years 10 months |
| 6% | 45 years 7 months |
Real markets do not deliver the same return every year. Two retirees with the same average return can end up far apart if one of them meets a falling market in the first few years, when the balance is largest and every withdrawal sells investments at low prices. The historical studies behind the 4% rule include those bad starts, which is why the rule asks for less than a steady-return sum suggests. Use this calculator to see the shape of the problem, and a cautious return to leave yourself a margin.
Questions people ask
How long will $1 million last in retirement?
It depends on what you take out and what the rest earns. At a steady 5% return, $5,000 a month lasts 34 years and 6 months. If that $5,000 rises by 3% a year to keep up with prices, it lasts 20 years and 6 months. Taking $4,000 a month with no raises never runs out at 5%, because the growth is slightly more than the withdrawals.
What is the 4% rule?
Take 4% of your savings in the first year of retirement, then raise that dollar amount each year by inflation. It comes from William Bengen’s 1994 study of US market history, in which that pattern never ran out of money in less than 33 years.
Is the 4% rule still safe?
It is a starting point, not a guarantee. It is based on past US returns and a retirement of about 30 years, and it ignores fees and taxes. A longer retirement or a cautious portfolio argues for a lower rate. Bengen himself has since raised his own figure, first to 4.5% and later to about 4.7%, after adding more kinds of investments to his tests.
Should I include Social Security or a pension?
Enter only the amount that has to come out of savings. If you spend $4,500 a month and Social Security pays $1,900, the withdrawal to enter is $2,600.
Are taxes included?
No. Money taken from a traditional 401(k) or IRA is generally taxed as income, so enter the amount you take out before tax. The IRS explains the rules for IRA withdrawals in Publication 590-B.
Why does the calculator say my money never runs out?
Because the growth in the first month already covers the withdrawal, and the withdrawal is not set to rise. $500,000 at 5% earns about $2,037 a month, so $2,000 a month leaves the balance growing. Real returns are not steady, so treat this as a sign of a comfortable margin, not a promise.