How long will my money last is the question behind every retirement plan. The answer depends on how much you have saved, how much you take out each year, what your savings earn, how fast prices rise, and how long you live. This guide works through the answer with real numbers.
This is general education, not personal financial advice. No rule or calculator can promise an outcome for you. The examples use stated assumptions so you can see how the answer changes.
The Short Answer: Four Numbers Decide It
Your money lasts until yearly withdrawals, after investment growth, use up the balance. Four numbers drive that result: the starting balance, the yearly withdrawal, the return your savings earn, and inflation.
Change any one of these and the answer moves. Take out more each month and the money ends sooner. Earn a higher return and it lasts longer. With no growth and no rise in prices, 300,000 dollars divided by 2,500 dollars a month lasts 10 years. The same test on 600,000 dollars at 2,000 dollars a month lasts 25 years.
The 4 Percent Rule, Explained in Plain Words
The best known starting point is the 4% rule. It comes from research by financial planner William Bengen, published in 1994 in the Journal of Financial Planning, and from a 1998 study by three professors at Trinity University, Philip Cooley, Carl Hubbard, and Daniel Walz. Bengen tested every rolling 30 year retirement period in United States market history back to 1926. His answer was close to 4 percent.
In the first year of retirement, withdraw 4 percent of the starting portfolio. In every year after, take that same dollar amount, adjusted upward for inflation. A 1,000,000 dollar portfolio gives a 40,000 dollar first year withdrawal. If inflation runs 3 percent that year, the second year withdrawal is 41,200 dollars. By year ten at 3 percent inflation each year, that withdrawal reaches 52,191 dollars.
The rule also gives a fast way to size a target. Since 4 percent is one twenty fifth, multiply yearly spending by 25. Spending of 40,000 dollars a year points to 1,000,000 dollars saved, and spending of 60,000 dollars a year points to 1,500,000 dollars. The rule has honest limits. It was tested on United States stock and bond returns only, over about 30 years, using gross returns, so fees and taxes were not part of the calculation. A 1 percent yearly fee on top of a 4 percent withdrawal behaves much like a 5 percent withdrawal. Some researchers now argue for a lower rate, closer to 3 percent to 3.5 percent, for very long retirements.
Worked Example 1: One Million Dollars, Four Thousand a Month
A withdrawal calculator makes the trade off concrete. Take a retiree aged 65 with 1,000,000 dollars saved, taking out 4,000 dollars a month, raising the withdrawal by 3 percent each year, with a steady 5 percent yearly return. The money lasts 27.1 years, running out at age 92.1.
The same calculator answers the reverse question. To make that 1,000,000 dollars last 30 years, to age 95, the most you can take in the first year is 3,702.30 dollars a month, with the same 3 percent raise and 5 percent return. The difference between 4,000 dollars and 3,702.30 dollars a month is the price of five extra years of cover.
The withdrawal rate sets the pace more than the balance does. At a 4 percent rate, 500,000 dollars supports 20,000 dollars a year. Raise the withdrawal to 3,000 dollars a month, a 7.2 percent rate, and the same 500,000 dollars runs out in about 18.7 years, assuming a 6 percent return and 2.5 percent inflation.
Worked Example 2: The Simple No Growth Test
Before trusting any calculator, run the no growth test: divide the balance by the monthly withdrawal. A balance of 108,000 dollars with a 900 dollar monthly withdrawal lasts 10 years, ending at age 75 for a 65 year old. To stretch the same 108,000 dollars to age 95, the monthly withdrawal must fall to 300 dollars.
The test is deliberately harsh, since real savings earn something. But it cannot hide behind optimistic return assumptions. If the no growth answer is far short of the years you need, the plan needs a smaller withdrawal, a larger balance, or other income first.
How Long Your Money Needs to Last
A plan needs a finish line, and the honest one is longer than most people guess. As of 2024, someone who is 65 could reasonably expect to live to approximately age 84 for a man and 87 for a woman, and about 1 in 4, according to Vanguard, could live to age 96. That is why the 30 year horizon used in the original research is not a planning cushion. It is the central case for a 65 year old. For many married couples, the plan should cover about 30 years, and some should plan for as long as 40 years. If you are retiring early, expect even more years than that.
Two age rules shape the timing. For anyone born in 1960 or later, the full retirement age for Social Security is 67. If taking benefits early, you can claim at 62, which reduces the benefit. A retiree at 65 has a life expectancy at 65 of about 19 years. In the United States, Medicare begins at 65. The longer you wait to claim, the higher your monthly benefit.
Three Things That Shorten the Answer
First, inflation. A withdrawal that stays flat in dollars buys less every year, which is why the 4 percent rule raises the dollar amount by inflation each year. If inflation runs higher than expected, the money buys less, and the plan ends sooner.
Second, the order of returns, called sequence of returns risk. Take a 1,200,000 dollar portfolio. If you retire in the first three years and face 5.6 percent annual losses, you could end up with 268,000 dollars by the age of 90, about 14 percent less than the 1,000,000 dollar alternative. That is what sequence of returns risk is. It is a risk that, over time, your money depletes due to market downturns early in your retirement.
Third, the withdrawal rate itself. Research on balanced portfolios groups rates into zones. Below 5 percent was considered safe for 30 year horizons in the original research, from 5 to 6 percent was a caution zone, and above 6 percent was a danger zone for long retirements. The figures depend on asset mix and time horizon, but the pattern is strong. The zones are a warning, not an investment recommendation.
What Makes Money Last Longer
Spending less is the strongest lever, because it helps twice: a smaller withdrawal drains the balance more slowly, and a smaller target is easier to reach in the first place. The 4 percent rule is a starting point, not a promise. If you can live on 3 percent, the money lasts much longer.
Other income helps in the same way. Social Security and pension income reduce the amount the portfolio must provide. A part time job or rental income does the same thing. Every dollar of outside income is a dollar the portfolio does not have to replace.
Flexibility is the third lever. Plans that allow spending to flex have historically supported higher withdrawal rates. Cutting back in down years, or pausing inflation raises, can add years to a plan. A fixed withdrawal that never changes is the most fragile kind of plan.
A Simple Method to Estimate Your Own Number
Use five steps. Add up every account you will spend from in retirement. Work out yearly spending, then subtract yearly income from Social Security, pensions, and part time work. The gap is what the portfolio must cover. Multiply that gap by 25 for a 4 percent plan, or by 33 for a 3 percent plan. Divide the balance by the monthly withdrawal for the no growth test, then run the same numbers through a calculator. That number is a starting point, not a guarantee.
Frequently Asked Questions
Does the 4 percent rule guarantee my money will last 30 years?
No. It describes how a fixed withdrawal plan would have performed against United States market history. The future could be worse. Fees, taxes, and spending shocks can all shorten the result.
How much money do I need to retire?
Multiply the yearly amount your savings must provide by 25. If your spending is 60,000 dollars a year, your target is 1,500,000 dollars. The figure depends on your spending and your retirement length.
What changes if I retire early?
A longer retirement needs a lower withdrawal rate. The original research covered about 30 years. Retiring at 55 needs your money to last about 40 years, a target that could reach about 33 times your annual spending at a 3 percent withdrawal rate. If you retire at 65, you need 25 times your yearly spending. These are planning guides, not guarantees.
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