How long will my money last?

How long will my money last?

With balance B, monthly return r and a monthly withdrawal W, the number of months is n = −ln(1 − B·r ÷ W) ÷ ln(1 + r). $500,000 earning 5% a year with $3,000 taken out each month lasts about 285 months — 23 years 9 months.

What if returns cover the withdrawals?

If the monthly return is at least the withdrawal, the balance never runs out. At 5%, $500,000 earns about $2,083 a month, so withdrawals up to that amount leave the balance intact.

Does it include inflation?

No — the withdrawal stays the same. To allow for rising prices, enter a real (after-inflation) return; the real return calculator gives it.

Are returns really steady?

No — real investment returns go up and down from year to year. Treat the result as a rough guide, not a plan.

What about taxes?

Withdrawals from traditional 401(k) and IRA accounts are usually taxed as income, so the amount you can spend may be smaller. The calculator works with the amount taken out.

What is the 4% rule?

A rule of thumb from William Bengen’s 1994 analysis of historical U.S. returns: withdraw 4% of the starting balance in the first year, then raise the amount with inflation each year, and the money lasted at least 30 years in the periods he tested. This calculator is different: it keeps the withdrawal fixed and uses one steady return.

How the formula behaves

Each month the balance earns interest at one twelfth of the annual rate, and then the withdrawal is taken out. The number of months until the money runs out is n = −ln(1 − B·r ÷ W) ÷ ln(1 + r). The logarithm exists only when the withdrawal W is larger than the monthly interest B·r; if interest covers the withdrawal, the balance never runs out. Small changes near that boundary have large effects: the closer the withdrawal is to the monthly interest, the longer the money lasts, and the date grows very fast.

A worked example

With $800,000 earning 5% a year, monthly interest is about $3,333. Withdrawing $4,000 a month lasts 431 months, which is 35 years 11 months. Raising the withdrawal to $5,000 shortens that to 264 months (22 years 0 months). Taking only $3,000 a month, less than the monthly interest, lets the balance last forever. At a 3% return the $4,000 withdrawal lasts 278 months (23 years 2 months). Dropping the return from 5% to 3% shortens the $4,000 plan by 12 years 9 months.

Common mistakes

Using a nominal return with a flat withdrawal assumes your spending never rises with prices; if you want a constant buying power, use a real return, or increase the withdrawal each year in a separate plan. Using an optimistic average return is the second error, since actual returns vary and bad years early in retirement do more damage than the same years later. Third, forgetting taxes: the withdrawal is the amount taken out, not the amount you can spend. And a result such as 36 years is an estimate under a steady return, not a guarantee; treat it as one scenario among several.

Sources: the closed-form annuity formula for a growing balance with regular withdrawals, as in standard finance texts (OpenStax Principles of Finance, time value of money); Bengen WP, “Determining Withdrawal Rates Using Historical Data”, Journal of Financial Planning (1994). Related: retirement calculator, real return calculator, RMD calculator and Social Security calculator.

Estimates for planning only — not financial or tax advice. Your lender, plan or tax professional decides. How we check our calculators.