How Safe Withdrawal Rate Is Calculated
This calculator uses the present value annuity formula: Monthly = Assets × (r/12) / (1 − (1 + r/12)^−n), where r is the annual return and n is the number of months. This gives the maximum monthly withdrawal that depletes the portfolio to exactly zero at end of the retirement period.
Safe Withdrawal at Different Asset Levels (5% return, 40 years)
| Portfolio Size | Monthly Withdrawal | Annual Withdrawal |
|---|---|---|
| $500,000 | $2,645 | $31,740 |
| $1,000,000 | $5,290 | $63,480 |
| $2,000,000 | $10,580 | $126,960 |
For early retirees planning 40+ years, use an inflation-adjusted return rate (nominal return minus expected inflation). To further reduce risk, maintain a cash buffer of 1–2 years of expenses and consider flexible spending — reducing withdrawals in down market years. The 4% rule is a useful benchmark, but a 3–3.5% rate provides greater safety for long retirements.
Frequently Asked Questions
Multiply your desired annual spending by 25 (the inverse of 4%). If you need $60,000/year, your FIRE number is $1.5 million. For a 40-year retirement, multiply by 30–33 to be more conservative.
Yes. Subtract any guaranteed income (Social Security, pension, rental income) from your monthly spending need first. Only the remaining gap needs to come from your portfolio, which can significantly reduce required assets.