Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A first-year withdrawal estimate assumes a specific, sustainable rate holds up over a full retirement, and that assumption depends heavily on market sequence. A portfolio that experiences poor returns early in retirement can run into trouble at the identical average return that would have been fine had the poor years come later instead.
Before you rely on it
What to check
Stress-test the withdrawal plan against a scenario with weak early returns, not just an average-return projection, since the first several years matter disproportionately.
The common error
Where people go wrong with retirement withdrawal calculator
Treating the first-year withdrawal figure as guaranteed sustainable for every future year regardless of market performance. The order returns arrive in, not just their average, materially affects whether a withdrawal rate actually lasts.
Sensitivity evidence
How initial withdrawal rate changes the estimated first-year income
| Initial withdrawal rate | Estimated first-year income | Portfolio withdrawal |
|---|---|---|
| 2.0% | $50,000 | $20,000 |
| 3.0% | $60,000 | $30,000 |
| 4.0%worked example | $70,000 | $40,000 |
| 5.0% | $80,000 | $50,000 |
| 6.0% | $90,000 | $60,000 |
Every input, tested
Which input moves the estimated first-year income most
| Input | Tested from | To | Estimated first-year income at each end | Swing |
|---|---|---|---|---|
| Initial withdrawal rate | 3.0% | 5.0% | $60,000 to $80,000 | $20,000 (29%) |
| Retirement portfolio | $900,000 | $1,100,000 | $66,000 to $74,000 | $8,000 (11%) |
| Other annual income | $27,000 | $33,000 | $67,000 to $73,000 | $6,000 (8.6%) |
Two variables at once
Estimated first-year income by initial withdrawal rate and retirement portfolio
| Initial withdrawal rate \ Retirement portfolio | $800,000 | $1,000,000 | $1,200,000 |
|---|---|---|---|
| 2.0% | $46,000 | $50,000 | $54,000 |
| 3.0% | $54,000 | $60,000 | $66,000 |
| 4.0% | $62,000 | $70,000 | $78,000 |
| 5.0% | $70,000 | $80,000 | $90,000 |
| 6.0% | $78,000 | $90,000 | $102,000 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Retirement portfolio | $1,000,000 |
| Initial withdrawal rate | 4.0% |
| Other annual income | $30,000 |
| Estimated first-year income | $70,000 |
| Portfolio withdrawal | $40,000 |
Where the inputs come from
Retirement portfolio is the total balance you will draw from at the start of retirement. The withdrawal rate is the share you take in the first year, and the other annual income covers Social Security, pensions and annuities. Enter the amounts before tax, since taxes depend on account type and other income. Using a portfolio value from a market peak can flatter the result, so consider a lower figure.
When the result stops applying
The withdrawal shown is pre-tax, and withdrawals from traditional accounts are taxable income, so spendable income is lower. A fixed percentage taken each year, as opposed to an inflation-adjusted dollar amount, produces very different outcomes when markets fall. The calculation is for year one only and does not test how long the portfolio lasts.
What to compare it with
Test durability with the investment withdrawal, sequence of returns and Monte Carlo calculators. The retirement income tax page converts gross withdrawals to spendable income, and the withdrawal order calculator compares which accounts to draw first. The retirement income gap page shows what is left uncovered.
People also ask
Frequently asked questions
Should I withdraw a fixed percentage each year?
A fixed percentage varies with the market and can force spending cuts after declines. An inflation-adjusted dollar amount from the first year is steadier but riskier for the portfolio.
Is 4% still a safe withdrawal rate?
It worked historically for 30-year retirements, but some researchers suggest a lower rate given today's valuations and longer lifespans. Flexibility in spending improves the odds.
Do withdrawals count as taxable income?
Withdrawals from traditional 401(k)s and IRAs are taxed as ordinary income, while qualified Roth withdrawals are tax free and taxable accounts owe tax only on gains.