Retirement Income Calculator: How Long Will Your Savings Last?
A retirement income calculator answers the decumulation question: given a starting balance, an annual withdrawal, and an expected return, how many years will the money last? This is the mirror image of saving — instead of building a nest egg, you are drawing it down — and the math is more fragile than most people expect.
How it's calculated
The calculator projects how long your savings last by applying your annual withdrawal each year and growing the remaining balance at your expected return. When the balance hits zero, the money is gone. A higher return or a lower withdrawal extends the runway; a poor early sequence of returns — called sequence-of-returns risk — can shorten it dramatically even if the long-run average looks fine.
The 4% rule is a common starting point: withdraw 4% of your balance in year one, then adjust for inflation each year. Research suggests this rate has historically funded a 30-year retirement in most market conditions. For your required minimum distributions starting at age 73, see the RMD calculator. To model the savings side, see the retirement savings calculator.
A worked example
You retire at 65 with $750,000 saved and plan to withdraw $40,000 per year (about 5.3% initial rate), growing with inflation. At a 6% return, the calculator shows the money lasting about 28 years to age 93. But if the market drops 25% in year one of retirement — reducing your balance to $522,500 before you withdraw — the money now lasts only about 23 years. That five-year difference illustrates sequence risk. A common mitigation: hold 1 to 2 years of expenses in cash or short-term bonds so you never sell equities in a panic during a downturn.
Common mistakes to avoid
- Ignoring sequence-of-returns risk. A 20% market loss in year one of retirement has a permanently larger impact than the same loss in year ten, because you are selling assets at depressed prices with no paycheck to recover.
- Using average returns as if they are constant. Averages hide year-to-year volatility. Sequence risk means bad years early in retirement are disproportionately damaging to portfolio longevity.
- Forgetting that withdrawals are taxable. Traditional IRA and 401(k) distributions count as ordinary income. Your gross withdrawal must be larger than your net spending need after taxes.
- Ignoring required minimum distributions. Starting at age 73, the IRS requires withdrawals from traditional accounts whether you need the money or not — which can push you into a higher tax bracket.
- Underestimating longevity. The Social Security Administration reports that a 65-year-old woman has a roughly 1-in-3 chance of reaching age 90. A 25-year retirement is a reasonable planning horizon; a 30-year horizon is prudent.
Frequently asked questions
What is sequence-of-returns risk?
Sequence-of-returns risk is the danger that poor market returns early in retirement will permanently reduce how long your savings last. Because you are selling assets each year to fund spending, a market crash in year one forces you to liquidate more shares at low prices — shares that never recover in your portfolio. The same average return with a different sequence produces drastically different outcomes.
How can I protect against sequence-of-returns risk?
One well-tested approach is maintaining a 1- to 2-year cash buffer or a short-term bond allocation equal to your near-term spending needs. This lets you avoid selling equities during a downturn. Another approach is flexible spending — reducing withdrawals by 10–15% in down years and spending more in up years. Both strategies extend portfolio longevity.
What withdrawal rate is safe for a 30-year retirement?
The 4% rule — withdrawing 4% of your initial balance and adjusting for inflation annually — has historically funded a 30-year retirement in most market conditions, based on the Trinity Study's analysis of historical return sequences. For retirements longer than 30 years, a 3% to 3.5% rate is more conservative.
When do RMDs start and how do they affect my drawdown plan?
Required minimum distributions from traditional IRAs and 401(k)s begin at age 73 under IRS rules. The IRS sets the amount based on your account balance and a life expectancy table. RMDs can force you to withdraw more than you planned, increasing your taxable income. Use the RMD calculator to estimate your first required withdrawal.
Should I include Social Security in this calculation?
Yes. Social Security income reduces the amount you need to withdraw from savings each year. If your Social Security benefit covers $2,000 per month and you need $4,000 per month total, you only need to withdraw $2,000 from your portfolio — effectively halving your withdrawal rate and significantly extending how long your savings last.