Safe withdrawal rate calculator

A "safe" withdrawal rate isn't a universal 4%. It's set by your stock/bond mix — the mix decides the real return, and the real return decides how long the money lasts.

How the math works

The income side is one line: the annual withdrawal is the portfolio times the rate. A 4% rate on $1,000,000 is $40,000 in year one. Flip it around and the rate is a multiple — 4% means you need 25 times your annual spending, because the portfolio is the spending divided by the rate.

The part most calculators skip is whether that withdrawal survives. That depends on the real return your mix earns. We blend two long-run benchmarks: 7.0% real for stocks and 2.0% real for 10-year Treasury bonds. A 60/40 mix blends to 5% real; all-bonds sits at 2% real.

Here g is that blended real return. When the withdrawal rate is at or below g, the portfolio never draws down — the growth covers the spending. When the rate is above g, the money runs down, and the formula gives the year it hits zero. This is a deterministic view: it assumes the real return arrives smoothly every year, which it never does. More on that below.

Worked example

Take a retiree at 67 with $1,200,000 in retirement savings, withdrawing 4% in year one — that's $48,000, adjusted for inflation each year after.

Run that against a stock-heavy mix earning 7.0% real. The withdrawal rate (4%) sits below the real return (7%), so the portfolio never depletes in this model — the same result the Trinity Study found for portfolios of 50%+ stocks. Now hold the $1,200,000 and the 4% withdrawal fixed, but move the money into all bonds at 2.0% real. The rate now sits above the real return, and the money runs out in about 35 years.

Same portfolio, same withdrawal, opposite outcome. The only thing that changed was the mix. That's the number the flat-4% calculators leave out.

When this calculator is wrong

The 4% rule is a starting point, not a guarantee. The Trinity Study (1998) found 4% withdrawals held up across most historical 30-year periods for stock-heavy portfolios — not all of them, and most current early-retirement plans stretch it to 40-, 50-, and 60-year horizons it was never tested on. The 4% rate is a reasonable plan with sequence-of-returns risk that needs monitoring, not a set-and-forget answer. The exception: for someone with substantial Social Security and a paid-off home, 4% on the remaining portfolio is conservative, because the Social Security floor changes the math.

Other ways this calculator misses:

• It hides sequence-of-returns risk. This model assumes the real return arrives smoothly. Real markets don't cooperate. Two retirees with the same average return can end up broke or rich depending on the order — a bad first decade while you're withdrawing does damage a good average can't undo. A calculator that multiplies portfolio by a rate cannot show this.
• The "perpetual" result is a model artifact. When the rate sits below the blended real return, this calculator says the money lasts forever. In a world with volatility, "forever" means "very likely, not certain." Treat it as "the rate has room," not a guarantee.
• Real returns are benchmarks, not forecasts. The 7.0% stock and 2.0% bond figures are long-run averages. Bond real returns in particular swing with the starting yield, and a decade can look nothing like the average.
• It ignores taxes and fees. Withdrawals from a traditional 401(k) or IRA are taxed as ordinary income. Fund expense ratios come off the return before you see it. Both shrink the real spendable number below what the rate implies.

What to do with the result

Read the result as two separate questions. First: does your withdrawal rate sit above or below the real return your mix earns? If it sits above, the money has a finite life, and the "years it lasts" number is the honest headline. If it sits below, you have room — but room isn't the same as safe.

The practical move is to check that your allocation matches the rate you're planning on. A 4% plan on a bond-heavy portfolio is the mismatch this calculator exists to catch: the rate assumes a stock-heavy real return the portfolio isn't earning. Either lower the rate to what the mix supports, or hold enough in stocks to earn the return the rate needs. And whichever you pick, revisit it after a bad first few years — that's when sequence risk shows up, and it's the one input a static rate can't price.

Common questions

Is the 4% rule still safe?

For a stock-heavy portfolio over a 30-year retirement, it held up across most historical periods — that's what the Trinity Study (1998) found. It was not tested on 50-year horizons, and it assumes a stock-heavy mix. On a bond-heavy portfolio, 4% is not the same rule.

What withdrawal rate should I use?

Match it to your mix. The safe rate rises with your stock allocation because stocks carry the higher long-run real return. A rate at or below your blended real return has room; a rate above it puts the portfolio on a clock.

Does my stock/bond allocation really change the safe rate?

Yes, and it's the main thing most calculators leave out. The 4% figure came from portfolios of 50%+ stocks. Shift toward bonds and the real return drops, which drops the rate the portfolio can sustain.

What is sequence-of-returns risk?

It's the risk that a bad stretch of returns early in retirement, while you're withdrawing, does damage that a good average later can't repair. Two retirees with identical average returns can have opposite outcomes based only on the order those returns arrived.

Does this account for Social Security or a pension?

No. This models withdrawals from an investment portfolio only. Guaranteed income like Social Security is a floor that sits underneath the portfolio, and it makes a given withdrawal rate safer than the portfolio math alone suggests.