Question 1

How is my "safe" monthly withdrawal calculated?

Accepted Answer

The calculator uses a present-value annuity formula to find the monthly withdrawal amount that would draw your balance down to exactly zero by your life expectancy, given your expected rate of return and inflation. It's a "spend it all by then" calculation, not a rule that guarantees the money will never run out sooner if actual returns are worse than assumed. For example, a $1 million balance with 25 years to life expectancy, a 6% expected return, and 3% inflation would produce a specific level monthly withdrawal, adjusted upward each year for inflation, calculated to draw the balance to exactly zero at the end of that 25-year period.

Question 2

What is sequence-of-returns risk?

Accepted Answer

This calculator assumes a constant, steady rate of return every year, but real markets don't work that way. A market downturn in the first few years of retirement, while you're also withdrawing money, can permanently damage your balance in a way that the same average return spread evenly over time would not. This is one of the biggest risks to a fixed withdrawal plan and a reason many retirees build in flexibility to spend less in down years. For example, a retiree who experiences a 20% market decline in their first year of retirement while simultaneously withdrawing income locks in losses on a permanently smaller balance — even if the market fully recovers the following year, the money already withdrawn never gets to participate in that recovery.

Question 3

Why does inflation matter so much here?

Accepted Answer

Payments increase once per year with the inflation assumption. The calculator discounts that exact schedule at the monthly investment return rather than subtracting inflation from return. It then simulates the same cash flows, including when inflation exceeds return. Results are nominal future dollars; market returns, taxes and actual spending can differ.

Question 4

Should I use my exact life expectancy as the end date?

Accepted Answer

Many planners recommend using a life expectancy well beyond the actuarial average (e.g., 90-95) to reduce the risk of outliving your savings, since running out of money late in life is a much worse outcome than leaving some behind. Try running this calculator with a few different life-expectancy assumptions to see how sensitive your safe withdrawal amount is. For example, using age 85 as the end date instead of age 95 for the same balance produces a noticeably higher "safe" monthly withdrawal figure — but running out of money at 85 while still alive at 90 is a far worse outcome than leaving money behind.

Retirement Withdrawal Calculator

Your Retirement Information

Ready to Calculate?

Understanding Safe Withdrawal Rates

How This Calculator Works

Frequently Asked Questions