How Long Will My Money Last?

Why withdrawal rate matters more than total return

Two retirees can earn the same average annual return over 30 years and have wildly different outcomes. The difference is how much they take out each year relative to their portfolio. A portfolio earning 7% per year and withdrawing 3% grows. One earning the same 7% but withdrawing 8% depletes in under 20 years.

The relationship between withdrawal rate and portfolio longevity is nonlinear. Small differences have large effects. Dropping from a 5% withdrawal rate to 4% doesn't extend portfolio life by 20%. It can double it, because the compounding effect of leaving more in the portfolio each year accelerates over decades.

This is why the first number you should know isn't your portfolio balance. It's your withdrawal rate. Divide your planned annual withdrawal by your portfolio. If the answer is above 5%, you're in risk territory for a 30-year retirement. If it's above 6%, you'll likely run short. The calculator shows exactly where your numbers land.

Sequence of returns: the risk the average hides

The average return figure that appears on every investment statement is worse than useless for retirement planning. What matters is the order returns arrive, not the average.

Say a portfolio earns -30%, -10%, +20%, +25%, and +15% over five years. The average is about 4%. But the retiree taking withdrawals during those first two bad years is pulling from a permanently smaller base. Every future recovery happens on less principal. The math works differently in reverse: positive years compound forward, but the damage from early losses is locked in because the withdrawn money never gets to recover.

This is called sequence-of-returns risk, and it's the main reason a simple average-return projection overstates portfolio longevity for people in the distribution phase. Retiring into a bear market is genuinely worse than retiring into a bull market with the same long-run average return.

The deterministic simulation in this calculator doesn't model sequence risk (that requires Monte Carlo analysis), but it shows the base-case trajectory. As a practical rule: if the base case shows your portfolio lasting 30 years, you have reasonable safety margin but not a guarantee. If it shows 22 years, you need a different plan.

How pension income transforms the math

The most powerful thing a pension does for a portfolio isn't what most people expect. It doesn't just provide income. It eliminates the sequence-of-returns problem for the income it covers.

When a pension covers $24,000 per year of a $50,000 spending need, the portfolio only needs to provide $26,000. That lower draw means the portfolio survives bad market years without catastrophic permanent damage. The pension payment during a 40% market crash is the same as during a record-breaking bull run. The portfolio, because it's drawing less, has more of its principal intact when the recovery comes.

The calculator shows this directly. Enter your pension income and watch the years-remaining figure change. A $2,000/month pension on a $500,000 portfolio can shift the outcome from exhaustion in 18 years to sustainability indefinitely, depending on total spending levels. That's not a rounding difference. That's the difference between a secure retirement and a financial emergency at 82.

The psychological value is underrated too. A retiree with a pension and a $400,000 portfolio sleeps differently than one with an $800,000 portfolio and no guaranteed income. The former knows their baseline is covered regardless of what markets do. The latter has to manage a volatile asset as their primary income source, which most people find genuinely stressful and which often leads to poor decisions at exactly the wrong moments.

The safe withdrawal amount: what sustainable actually means

The calculator shows a "safe withdrawal amount" for 30-year sustainability. This is the highest annual portfolio draw that doesn't exhaust the portfolio within 30 years at the return rate you entered. It's not a guarantee. It's the threshold where the math stops being survivable at that return assumption.

For most portfolios at a 6% return assumption, the safe withdrawal rate lands near 4% to 4.5% of starting balance. At 4% returns, it's closer to 3% to 3.5%. The number isn't fixed; it depends entirely on your return assumption and whether your withdrawals are inflation-adjusted.

If the calculator shows your current withdrawal is above the safe threshold, you have a few levers: reduce spending, increase guaranteed income (delay Social Security, buy an annuity), work a few more years to increase both savings and Social Security, or accept a higher probability of running short and plan to cut spending later if needed. None of these are catastrophic options. All of them are more manageable when you see the numbers clearly ahead of time.