How Long Will My Money Last With Systematic Withdrawals?

The 2019 Employee Benefit Research Institute report says over 40% of those 35 to 64 years old are likely to run out of money in retirement. That’s a lot. If you’re asking, “Will I run out of money in retirement?” you’re wise to consider that fate—use the investment withdrawal calculator to understand how long your money might last.

First, you want to know if your retirement funds will run out — then you’ll probably ask when. Will you be eighty? Ninety? Older? How long should your money last? The average person will live into their eighties.

According to the life expectancy calculator at Blue Print Income, I’ll likely live to 101 years old! (And I have a 25% chance of living to 107.)

If you don’t know how long you’re likely to live, then you won’t have a clue if you have enough money stashed away—and if your money runs out before your projected death date, that’s a massive problem.

(Scared you'll run out of money? You may want to take a look at our best investment apps post to see if you can improve on what you're doing already.)

What if you have $300,000? How long will that last in retirement? Our assumed inputs:

• Annual return on our retirement funds: 5%

• Monthly withdrawals needed: $3,000

• Inflated withdrawal each year: 2%

• Assumed tax on the interest: 20%

When we plug those figures into the “How long will my money last calculator,” we see that the money will run out in 9.2 years. (Unless you retire in your eighties, that’s probably not going to be long enough.)

Let’s bump that nest egg up a bit— What if you had a million bucks in retirement? How long would that last?

Our assumed inputs:

• Annual return on our retirement funds: 5%

• Monthly withdrawals needed: $3,000

• Inflated withdrawal each year: 2%

• Assumed tax on the interest: 20%

Yup, you guessed it—having a million dollars vs. 300,000 makes a huge difference. Instead of your money lasting nine years, it’s now projected to last over forty years. (Now we’re talking!)

What if we bump up our retirement savings to $1.5 million and still only withdraw $3,000 a month? How long will our retirement savings last?

Our assumed inputs (still unchanged):

• Annual return on our retirement funds: 5%

• Monthly withdrawals needed: $3,000

• Inflated withdrawal each year: 2%

• Assumed tax on the interest: 20%

It looks like we broke the tool (which is a good thing!). By drawing $3,000 a month from a $1.5 million pool of money, your retirement savings keep going up—and will last for over 50 years!

Perhaps we should live more lavishly. What do you say? Let’s bump up the draw to $5,000 a month. What happens then? Our money would last for nearly 35 years. That’s a solid result. You can live larger—and you likely won’t outlive your money.

Some people ask the retirement question a bit differently—they’re wondering what happens to their retirement savings if they make systematic withdrawals.

What does this mean?

This is exactly what we’ve been doing this entire post—we’ve been setting up withdrawals of $3,000 a month (and, on one occasion, $5,000 a month). Those are systematic—they happen consistently throughout the year.

Say we had $1,000,000 in a fund that earned 5% interest—and made systematic withdrawals of $3,000 a month, with 2% inflation each year—our money would last overforty years! If you want to test your personal systematic withdrawals, download the retirement drawdown calculator—and try it out.

Do you expect to get Social Security income when you retire? Given the uncertainty around Social Security, I’m not planning on it—but if you’d like to factor this in, we can certainly do it with the free retirement withdrawal calculator.

Here’show you figure out how long your money will last with Social Security:

• Come up with the monthly figure you need to live off in retirement.

• Estimate your Social Security payments each month.

• Subtract the Social Security amount from the total you need—this is the amount you’ll put into the retirement spend down calculator.

Here’s an example:

• The total you need monthly to live: $5,000

• The amount you’ll receive in Social Security each month: $2,000

• Remaining amount: $3,000—this is the amount you enter into the calculator

Let’s rework one of our examples above—the $300,000 retirement amount.

How long will 300k last in retirement with Social Security?

Previously, the retirement funds only lasted 9.2 years—but what if we have a $1,500 Social Security benefit each month? Instead of withdrawing 3,000 a month, we’ll only need $1,500. As the doorkeeper of the Wizard once said, “Well, that’s a horse of a different color!”

Instead of lasting just 9.2 years, our $300,000 will suddenly last for over twenty years! If you’re nearing retirement and only need funds for the next 20 years, then $300,000 might just be enough for you.

(Want to take more of a deep-dive into this? Check out our recent post, “How Long Will 400k Last in Retirement?”)

The 4% rule is simple—it assumes you’ll live on 4% of your total retirement fund each year.

If you have $1,000,000, you’ll withdraw 4%—or $40,000. If your investments also earned 4%, you’d still have $1,000,000—and you’d withdraw $40,000again the following year.

The 4% rule is a conservative approach to retirement spending—more often than not, your investments will earn 4% or more each year (and you’d still have over $1,000,000 when you die).

Heck, even if you earned nothing on your million bucks, and withdrew $40,000 every year—your retirement funds would still last 25 years. If you’re looking for a safe withdrawal rate, the 4% rule is for you.

The 7% rule in retirement is just what you’d expect it to be—this is when you withdraw 7% a year from your retirement funds.

The 4% withdrawal rate didn’t seem aggressive enough—but 7% is quite the jump up. Is it a bit too bold? I quickly tweaked the retirement withdrawal calculator so we could see this in action—

If you earn 5%, and you withdraw money at a 7% rate, here’s what happens—

At year 10:

• There’s $742,000 in your retirement account.

• Your 7% withdrawal amount is down to $52,000 a year.

At year 20:

• There’s $550,000 in your retirement account.

• Your withdrawal amount is down to $38,500 per year.

I don’t know about you, but this doesn’t seem ideal to me—in 20 years, I’d like to be spending more money, not less.

If you want to draw down funds at a specific rate per year, I’d target 5% or less. It’s safer—and you’re more likely to maintain your standard of living. Sure, you might need to accumulate more funds up front—but I bet your much older self will thank you (when you’re not eating Beefaroni for dinner).

If you want your funds to last longer, find more money.

• Get out of debt.

  • If you're in debt, you're not maximizing your income.

  • Use our debt snowball spreadsheet to pay off your debt fast.

• Sell stuff and invest the money.

  • Downsize your house.

  • Downgrade your car.

  • Sell any classics or collectibles you may have.

  • Sell off some land.

• Make more money.

  • Ask for a raise at work.

  • Take on a second job.

  • Start your own side gig.

• Cut your expenses.

  • Negotiate your bills.

  • Get rid of subscriptions you don’t need.

  • Eat out less.

  • Take fewer trips.

  • Sell stuff that costs you money.

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Put anything you can into retirement so the money can grow, and carry your farther into your retirement years. It’s never too late to save money!

If you want your money to stretch further in retirement, it’s important to spend as little as you can early on. This will allow your retirement savings to grow rather than shrink. Use some of the ideas above to cut costs and keep your retirement account as beefy as possible.

Just because you retire, doesn’t mean you need to stop making money. Do you have something you like to do that could earn a few bucks?

• Writing

• Fixing machinery

• Art

• Web design

• Engineering

• Teaching

• Consulting

Or maybe you just love talking to people, so you get a part-time job at a local store. You might enjoy it (and bring home a few hundred bucks a month at the same time).

Making some extra money in your seasoned years will improve the longevity of your retirement accounts—and give you something fun and purposeful to do.

If you don’t have any hope of quickly loading up your retirement accounts, cutting your expenses, or making money in retirement—then your last option is to keep working and retiring later.

If you’re 60 years old, and the calculator shows that your money will only last 20 years—you may want to wait another five years before pulling the plug on your work.

Nobody wants to run out of money when they’re old and incapable of working. (That’s just too scary of a place to be.) When in doubt, work a few more years while you can.