Short answer: divide your savings by your annual spending to get a rough lifespan — $600,000 ÷ $40,000/year ≈ 15 years with zero growth. The classic 4% rule refines this: withdraw 4% in year one, adjust for inflation after, and a balanced portfolio has historically lasted 30 years.
The simplest estimate: division
Strip away growth and inflation for a moment. If you have savings of S and spend W per year, your money lasts roughly S ÷ W years:
- $500,000 ÷ $40,000/year = 12.5 years
- $800,000 ÷ $40,000/year = 20 years
- $1,000,000 ÷ $50,000/year = 20 years
This is your conservative floor — it assumes your money earns nothing. Real portfolios usually earn something, which extends the timeline, but inflation eats into spending power, which shortens it. The truth sits between this floor and the optimistic models.
The 4% rule, with verified math
The 4% rule comes from 1990s research (the “Trinity study”) testing withdrawal rates against historical US market data. The rule: withdraw 4% of your portfolio in the first year of retirement, then adjust that dollar amount for inflation each year after.
Example with $1,000,000:
- Year 1 withdrawal: $1,000,000 × 4% = $40,000
- If inflation runs 3%, year 2 withdrawal = $40,000 × 1.03 = $41,200, and so on.
Now let’s verify it survives 30 years with a steady 6% portfolio return and 3% inflation, computed year by year (balance grows 6%, then the inflation-adjusted withdrawal is subtracted):
- After 30 years of this, the remaining balance is approximately $1,321,853 — the portfolio didn’t just survive, it grew.
Of course, real markets don’t deliver a smooth 6% every year. The original research tested against actual historical sequences — including the Great Depression and 1970s stagflation — and 4% survived 30 years in the vast majority of cases. That’s the rule’s real claim: not that math guarantees it, but that history mostly supported it.
Sequence risk: why the order of returns matters
Here’s the catch the smooth 6% example hides. Two retirees can earn the same average return over 30 years but get very different outcomes depending on when the bad years hit.
If the market crashes 25% in your first two years of retirement while you’re withdrawing $40,000+ annually, your portfolio shrinks from both sides at once — and it may never recover, because you’re selling investments at depressed prices to fund withdrawals. The same crash happening in year 20, when compounding has already done its work, is a blip.
This is sequence-of-returns risk, and it’s the biggest threat to the 4% rule. Practical defenses:
- Keep 1–2 years of spending in cash or short-term bonds so you don’t sell stocks in a downturn.
- Be ready to trim discretionary spending after a bad market year.
- Consider delaying large withdrawals early in retirement if markets fall.
The quick division shortcut for any withdrawal rate
You can flip the 4% rule into a planning shortcut. Your savings need to be roughly 25× your annual spending (because 1 ÷ 0.04 = 25):
- Need $40,000/year? Target ≈ $1,000,000
- Need $60,000/year? Target ≈ $1,500,000
- Spending only $30,000/year? ≈ $750,000 may do it
Remember this covers portfolio withdrawals only — Social Security, pensions, or part-time income reduce what your savings must provide.
When 4% is too much — or too little
The 4% rule is a starting framework, not a law. Consider adjusting when:
- You retire very early. A 45-year-old needs money to last 40–50 years, not 30 — a lower initial rate (3–3.5%) is the common adjustment.
- You have significant guaranteed income. If Social Security and a pension cover most spending, your portfolio withdrawals are small relative to the balance, and 4% is conservative.
- Fees are high. A 1% advisory fee plus fund expenses effectively raises your withdrawal rate — the portfolio must earn that much more to keep up.
- You want flexibility. Many retirees use dynamic strategies: 4% as a baseline, spending a bit less after down years and a bit more after strong ones.
Want to model your own numbers? Try our 457 calculator for long-term growth projections, or browse every tool in our calculators directory.
Frequently asked questions
How long will $500,000 last in retirement?
At $40,000/year with zero growth, about 12.5 years ($500,000 ÷ $40,000). With investment growth, longer — but inflation shortens real purchasing power. Your actual spending level matters more than the headline number.
What is the 4% rule?
Withdraw 4% of your portfolio in year one of retirement, then adjust that amount for inflation each year. Historical US market testing suggests this sustained 30-year retirements in most cases. It’s a guideline, not a guarantee.
Is the 4% rule still valid?
It’s debated. Lower bond yields and longer life expectancies have led some researchers to suggest 3.5–4% as a more cautious range, while others note the original research already included terrible market periods. Treat 4% as a starting point and adjust for your situation.
What is sequence-of-returns risk?
The danger that poor market returns early in retirement — combined with ongoing withdrawals — permanently damage your portfolio, even if long-term average returns are fine. Mitigate it with a cash buffer and flexible spending.
How do I calculate how long my savings will last?
Start with savings ÷ annual spending for a conservative floor. Then refine with the 25× rule (save 25 times your annual spending need) and stress-test with lower assumed returns.
Does Social Security change the math?
Yes, favorably. Every dollar of Social Security or pension income is a dollar your portfolio doesn’t need to provide. Subtract guaranteed income from your spending first, then apply the 4% framework to the remainder.
Methodology reviewed September 2026. The 30-year projection was computed year-by-year at 6% growth with 3%-inflation-adjusted withdrawals; real markets vary. This article is educational content, not financial advice.