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Summary
This calculator answers: “How long will my savings last if I withdraw a fixed amount each month?” It models month-by-month drawdown from a portfolio, factoring in investment growth and inflation-adjusted withdrawal increases.
The concept is central to retirement planning. The landmark Bengen (1994) study and the Trinity Study (1998) established that a 4% initial withdrawal rate, adjusted annually for inflation, has historically survived at least 30 years in the vast majority of market conditions.
How it works
The calculator runs a month-by-month simulation. Each month:
- The remaining balance earns investment returns:
balance × (1 + monthlyRate) - The monthly withdrawal is subtracted from the balance
- At the start of each new year, the withdrawal amount increases by the inflation rate
This continues until the balance reaches zero (depleted) or 100 years have passed (never depleted).
Why inflation matters
If you withdraw a fixed £1,500/month forever, your purchasing power erodes over time. In 20 years at 2.5% annual inflation, £1,500 has the buying power of roughly £900 in today’s terms. The calculator increases your withdrawal each year to maintain purchasing power — which means your savings deplete faster than a naive fixed-withdrawal model suggests.
The formula
Where
For the special case of zero inflation, a closed-form annuity formula gives the exact number of months:
Where
This formula only works when W > P × r (i.e., withdrawals exceed monthly interest). If W ≤ P × r, the savings never deplete.
The 4% rule
The 4% rule is the most widely cited guideline for sustainable retirement withdrawals:
- Origin: William Bengen’s 1994 paper tested various withdrawal rates against US stock/bond returns from 1926–1995
- Finding: A 4% initial withdrawal (inflation-adjusted each year) survived at least 30 years in every historical period tested
- Portfolio assumption: 50% US stocks, 50% intermediate-term US Treasury bonds
- Trinity Study (1998): Validated Bengen’s findings — 4% had a ~96% success rate across 30-year periods
Practical interpretation: If you have £500,000, the 4% rule says you can withdraw £20,000 in year 1 (£1,667/month), increasing by inflation each year, with high confidence your money lasts 30+ years.
Caveats:
- Based on US historical data — UK and global returns may differ
- Assumes a balanced stock/bond portfolio, not cash savings
- For retirements longer than 30 years (e.g., early retirees), 3.5% is considered safer
- Does not account for sequence-of-returns risk in a deterministic model
Worked example
£500,000 savings, £2,000/month withdrawal, 4% return, 2.5% inflation
Monthly interest rate
= 0.3333%
Year 1 annual withdrawal
= £24,000
Effective withdrawal rate
= 4.8%
Year 1 end balance (after 12 months of simulation)
= £495,926
Year 2 withdrawal increases by 2.5%
= £24,600/year
Year 2 end balance
= £491,075
Continue simulation until balance reaches zero
= 25 years 6 months
Result
Savings last 25 years 6 months. Total withdrawn: £841,710 (including £341,710 in investment growth).
Inputs explained
- Current savings — your total starting pot (pension, ISA, investments, cash savings)
- Monthly withdrawal — how much you withdraw each month in today’s money
- Expected annual return — the nominal annual return on your investments (e.g., 4% for a balanced portfolio, 6-7% for equity-heavy)
- Annual withdrawal increase (inflation) — how much your withdrawal increases each year to maintain purchasing power (2-3% is typical)
Outputs explained
- Time until depletion — how many years and months your savings will last (or “Indefinitely” if returns exceed withdrawals)
- Effective withdrawal rate — your annual withdrawal as a percentage of initial savings. Below 4% is generally considered sustainable for 30+ years.
- Total withdrawn — the total amount you’ll receive over the full drawdown period (always more than your initial savings if you earn any investment returns)
- Verdict — a sustainability assessment:
- Sustainable (green): savings last 30+ years or never deplete
- Caution (amber): savings last 15-30 years
- At risk (red): savings deplete within 15 years
- Balance chart — a visual showing your savings balance declining (or growing) over time
- Year-by-year table — annual snapshots of balance, withdrawal amount, and cumulative total drawn
Assumptions & limitations
- Constant return rate — the calculator assumes a fixed annual return. Real markets fluctuate, and sequence-of-returns risk means that poor returns early in retirement are far more damaging than poor returns later. This is a deterministic model, not a Monte Carlo simulation.
- No tax modelling — withdrawals from pensions, ISAs, and general investment accounts have different tax treatments. The calculator shows gross withdrawals only.
- Monthly compounding — interest is compounded monthly. Daily compounding would give marginally higher returns but the difference is negligible.
- Inflation applies to withdrawals only — the calculator increases your withdrawal by the inflation rate, but does not model the effect of inflation on your portfolio’s real return separately (the return rate is assumed to be the nominal rate).
- No fees — investment management fees (typically 0.1-1.5% annually) reduce your effective return rate. Subtract fees from your expected return before entering it.
Verification
No official government calculator exists for savings withdrawal. Verified against hand calculations and the annuity formula.
| Savings | Withdrawal | Return | Inflation | Expected time | Verification method |
|---|---|---|---|---|---|
| £100,000 | £1,000/mo | 0% | 0% | 100 months | Trivial: £100k / £1k = 100 |
| £100,000 | £1,000/mo | 6% | 0% | 139 months | Annuity formula: n = −ln(1 − 100000×0.005/1000) / ln(1.005) = 138.98 |
| £500,000 | £2,000/mo | 4% | 2.5% | 306 months (25y 6m) | Month-by-month simulation |
| £100,000 | £1,000/mo | 0% | 5% | < 100 months | Inflation increases withdrawals, depletes faster |
| £1,000,000 | £2,000/mo | 8% | 2% | Never depletes | Returns (£80k/yr) exceed withdrawals (£24k/yr) |
Accounting identity
For every simulation: initialSavings + totalInterestEarned = totalWithdrawn + finalBalance
This identity is verified in unit tests across multiple scenarios.
Sources
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