How long will my money last?

Robert Graham

You can also use the calculator in full screen.

How long will my retirement last OR How long will $1,000,000 last?

This could also be a question formed about a windfall or sudden acquisition of some wealth like:

How long will my financial windfall from an inheritance or life insurance last?

Or perhaps the answer you need is for a more modest sum, like:

How long will my $500,000 last?

The answer to these questions are all interlinked. The calculator above can help you figure what any sum might do for you over a number of years if we fix the expectations for the interest rate, taxes, and how much you will withdraw each month. This can be a really useful rule of thumb to guide you.

For example, withdrawing $100,000 each year when the market return for your money is 5.5% will drain $1,000,000 fund in about 11 years. The same market return and withdrawal pattern will burn through $500,000 in just five years.

It’s impossible to know how long a fund will last unless you know how much you plan to withdraw and spend each year. The “4% safe withdrawal rate” is a calculation from a lot of historical data that shows you can typically maintain a 4% income from a portfolio over most retirement windows. 4% is 0.04. 0.04 times $1,000,000 is $40,000. So, the safe withdrawal income is about $40,000. For $500,000 it moves down to $20,000.

What makes it safe and how does that translate to life?

Well, if you average taking out $20,000 a year or $1,667 a month from your $500,000 and the market returns average 5.5% in 30 years you’ll have $1,000,000 left. Now, that’s pretty safe.

You could, of course, choose to take a little more as the portfolio grew but you’d probably want to seriously consider how long you expect to live and if you want to leave behind a legacy amount of money for an estate, family, or charity.

Now, assuming a straight 5.5% return usually shows great outcomes and this calculator isn’t sophisticated enough to reveal what happens when you are withdrawing a less safe amount but the market takes a dive in the early years of retirement. It can be grisly. That’s why the “4% rule” is so safe. There’s never been a market where you couldn’t recover, historically speaking.

How do professional wealth managers and advisors make the projections and decisions?

Professionals in wealth management would use Monte Carlo simulations that give expectations like, “There’s a 65% chance you can maintain $65,000 annual income from this next egg for the next 25 years.” We can help you if you want to get more sophisticated, but for many cases it’s not required.

How much money will I have when I retire?

Checkout our calculator for retirement income and projecting your nest egg.

What’s the 4% safe withdrawal rule?

This rule specifies that based on historical market results, it’s safe to withdrawal 4% of your total retirement savings every year without risk of depleting the funds as long as you keep it invested in the market. This would have worked even in the Great Depression.

Our calculators generally use 4% as the rule of thumb for how much retirement income a given amount of retirement savings will generate. You might want to have a lower rate for a more conservative projection (probably not). More likely, you may tinker with a higher rate depending on how many retirement years you are looking to fund. 

Those choices also depend on whether you want to leave behind money or spend what you’ve accumulated on the way out. If you’re already 90, you probably don’t need to project 35 years of retirement ahead. If you’re 60 you may well want 35 years or more depending on health, history, and other factors.

What is a dynamic withdrawal strategy?

This is a method of pulling out money in retirement that folks use to smooth out depleting the funds when the market is highly volatile. You pull out more money in good years and less money in bad years.

The calculators don’t use a strategy like this because we can’t project what the market returns might be in a future year or series of years.

It’s most useful to match some desired spending pattern changes. The 4% rule is inflexible and won’t work for everyone or every retirement runway. You may want to take a European vacation in retirement, but wait for the one year in the next five that the market returns are high to make the withdrawals.

Dynamic strategies are many and can be very complex. It’s important to proceed carefully and with clarity about how these choices affect your future. One major difference for dynamic withdrawal strategies: tax implications on annual income.

How long will Social Security last?

There are some financial problems with the social security program in the United States. The promises are outweighed over the longer haul by the cost of the promises. The system as constructed would likely run out of funds around 2035.

That said, it is very unlikely that the system will collapse or stop providing benefits. Social Security is not that difficult to save with some changes to either the cost side where benefits to recipients are reduced or to the income side where more taxes are raised or directed to Social Security programs.

It is wise not to make Social Security the fullness of your retirement plan because you will not have control over political choices that may severely impact your retirement.

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