Most retirement advice focuses on saving: how much to put away, which account to use, and when to start. The harder question comes later, when the paychecks stop: how much can come out each month without running dry at 80, 85, or 90? That is what a retirement withdrawal calculator answers.
Quick answer
The 4 percent rule is a common starting point: withdraw 4 percent of your savings in the first year of retirement, then adjust for inflation each year. On a 500,000 dollar nest egg, that means 20,000 dollars a year, or about 1,667 dollars a month. Your safe number depends on spending, other income, and how long the money must last.
How to estimate your own withdrawal number
A withdrawal number comes from five steps:
- Add up annual spending in retirement. Housing, food, transport, insurance, health care, and travel, based on last year’s actual spending.
- Subtract income that does not come from savings. Social Security is the biggest one for most retirees: monthly benefits are typically available from age 62 after 10 years of work paying Social Security taxes, with full retirement age between 66 and 67. Pensions, rental income, and part-time work count too. What is left is the gap savings must cover.
- Multiply the gap by 25. This is the 4 percent rule worked backwards: a 30,000 dollar yearly gap needs a 750,000 dollar nest egg, and a 20,000 dollar gap needs 500,000 dollars.
- Compare the result with what is actually saved. If the nest egg is smaller than the target, there are only four levers: save more, spend less, retire later, or accept a higher withdrawal rate with more risk.
- Check required minimum distributions and taxes. After age 73, the IRS requires withdrawals from most traditional accounts, and those withdrawals are taxed as income. For a quick check, the Retirement Calculator on this site turns a savings balance and a target monthly income into an estimate.
The 4 percent rule, explained
The 4 percent rule comes from research by financial planner William Bengen, published in the Journal of Financial Planning in 1994. Bengen tested every rolling 30-year period of United States stock and bond returns from 1926 onward and asked what starting withdrawal rate never ran out of money, even for someone retiring right before a market crash. His answer was about 4 percent. Four years later, the Trinity Study found the same rate lasted the full 30 years in about 95 percent of historical periods for stock-heavy portfolios.
In the first year of retirement, withdraw 4 percent of the total portfolio, then withdraw the same dollar amount, adjusted for inflation, every year after. On a 1,000,000 dollar portfolio, that is 40,000 dollars in year one, then 40,000 dollars plus inflation each year after. The percentage is applied once, to the starting balance, not to the balance each year. The rule also gives a fast savings target: multiply first-year spending by 25.
Where the 4 percent rule falls short
The rule is a planning tool, not a guarantee. It assumes a 30-year retirement and a portfolio holding roughly 50 to 75 percent stocks, so it can be too high for someone retiring at 55 and living to 95. It also assumes rigid spending and rests on United States market history. Recent research puts the safe starting rate between about 3.7 percent (Morningstar) and 4.7 percent (Bengen, revisiting the data in 2024). Treat 4 percent as a guardrail, not a promise. For the arithmetic, see the 4 percent rule calculator guide on this site.
Worked example: a 500,000 dollar nest egg
This is an illustrative example, not a prediction of any real portfolio. It uses simple annual math, with withdrawals at the end of each year and a steady average return where stated.
Consider a retiree who stops work at 65 with 500,000 dollars saved and wants 2,500 dollars a month, or 30,000 dollars a year. That is 6 percent of the starting balance, well above the 4 percent rule, which supports only 20,000 dollars a year, or about 1,667 dollars a month. Supporting 30,000 dollars a year at 4 percent would need a 750,000 dollar nest egg, not 500,000.
How long does the money last at the higher withdrawal rate? It depends on investment returns:
| Scenario | Annual withdrawal | How long the money lasts | Runs out around age |
|---|---|---|---|
| No investment growth at all | 30,000 dollars | About 17 years | 82 |
| Steady 4 percent average return | 30,000 dollars | About 29 years | 94 |
| Steady 4 percent average return | 20,000 dollars (the 4 percent rule amount) | Does not run out; balance grows | Never |
The gap between the three rows is the whole lesson. At 6 percent, the money can run out during the retiree’s lifetime if returns are poor. At 4 percent, the same nest egg lasts indefinitely under the same return assumption. Four realistic fixes exist: save more, spend less, retire later, or let other income carry part of the load. Every extra 100,000 dollars supports about 333 dollars a month at a 4 percent rate, and if Social Security covers 1,000 dollars a month, the portfolio only needs to provide 1,500 dollars a month.
Required minimum distributions
Required minimum distributions, or RMDs, are the minimum amounts the IRS requires to be withdrawn from most tax-deferred retirement accounts each year, including traditional IRAs and most employer plans. Roth IRAs have no required distributions during the owner’s lifetime, and Roth 401(k) accounts have been exempt since 2024.
Under the SECURE 2.0 Act, RMDs begin at age 73 for people born between 1951 and 1959, rising to 75 in 2033 for people born in 1960 or later. The first RMD is due by April 1 of the year after turning 73, and every RMD after that is due by December 31 of its year. The amount is the prior December 31 balance divided by a life expectancy factor from the IRS Uniform Lifetime Table. At age 73 the factor is 26.5, so the first RMD is about 3.8 percent of the balance: about 18,868 dollars on a 500,000 dollar traditional IRA.
Missing an RMD is expensive: the amount not withdrawn can be subject to a 25 percent excise tax, reduced to 10 percent if corrected within two years. The IRS states these rules in its required minimum distribution FAQs. An RMD cannot be rolled over, and extra taken in one year does not count toward a future year’s RMD.
Taxes on retirement withdrawals
Taxes are the part of withdrawal planning most people underestimate. A 2,500 dollar monthly withdrawal is not 2,500 dollars of spending money unless the tax bill has already been accounted for. Withdrawals from traditional 401(k) plans and traditional IRAs, including RMDs, are taxed as ordinary income in the year they are taken, and a large withdrawal can push income into a higher bracket. The federal tax brackets guide on this site shows the current brackets.
Roth accounts work the other way. Qualified Roth withdrawals are tax-free: earnings qualify when the owner is at least 59 and a half and the account has been open for at least five tax years. Roth contributions, already taxed when they went in, can be withdrawn at any age without tax or penalty. The trade-offs are covered in the Roth versus traditional IRA guide.
Timing matters too. Withdrawals from tax-deferred accounts before age 59 and a half generally face a 10 percent additional tax on top of ordinary income tax, although the IRS allows exceptions, including disability and certain medical expenses. After 59 and a half, the extra 10 percent goes away.
Common mistakes
- Withdrawing a fixed percentage of the current balance every year. Taking 4 percent of the portfolio’s value each year makes income swing with the market: a 20 percent drop becomes a 20 percent pay cut.
- Forgetting taxes. Planning to spend 3,000 dollars a month while withdrawing 3,000 dollars a month from a traditional IRA leaves a shortfall once tax is due. Budget on the after-tax amount.
- Taking too much in the first years. The first decade of retirement matters most: a market drop early on, combined with large withdrawals, shrinks the portfolio so far that later recoveries cannot repair it. This is called sequence-of-returns risk.
- Ignoring required minimum distributions. RMDs force withdrawals and the tax that comes with them, starting at 73. The 25 percent penalty for a missed RMD makes the surprise worse.
- Keeping no cash buffer. Retirees who must sell investments to pay every bill are forced to sell in down markets. Holding one to two years of spending in cash lets investment withdrawals pause while markets recover.
Pros and cons of a fixed withdrawal rule
Pros
- Simple to calculate and easy to follow year after year.
- Tested against nearly a century of United States market history, including the worst starting years on record.
- Produces a steady, predictable income that can be budgeted around.
Cons
- Rigid: it does not adjust when markets fall or when spending needs change.
- Built for a 30-year retirement, so it can be too high for early retirees and too low for people with shorter horizons.
- Ignores taxes, required minimum distributions, and other income unless the planner adds them separately.
Frequently asked questions
How much can I withdraw per month from 500,000 dollars?
Under the 4 percent rule, 500,000 dollars supports about 1,667 dollars a month before tax. Withdrawing 2,500 dollars a month is a 6 percent rate, which runs out in about 17 years with no growth, or about 29 years at a steady 4 percent return.
Does the 4 percent rule still work in 2026?
It remains a reasonable starting point, but it is not a guarantee. Recent research puts the safe starting rate between about 3.7 percent and 4.7 percent. Use 4 percent as a guardrail.
Do I have to withdraw at 73 even if I do not need the money?
Yes, for traditional IRAs, 401(k) plans, and similar tax-deferred accounts, the required minimum distribution must be taken starting at age 73, rising to 75 in 2033 for people born in 1960 or later. Roth IRAs have no lifetime required distributions.
Are Roth withdrawals really tax-free?
Qualified Roth withdrawals are tax-free: earnings qualify when the owner is at least 59 and a half and the account has been open for at least five tax years. Contributions can be withdrawn at any time without tax or penalty.
Retirement income is a math problem with a personal answer. Add up spending, subtract Social Security and any pension, multiply the gap by 25, and check the result against required distributions and taxes. Then run the numbers again every year. A withdrawal plan made early, even a rough one, beats a generous guess made after the paychecks stop. The Retirement Calculator is a good place to start.
Sources and methodology
The figures, rules, and rates in this guide come from the authoritative sources linked throughout the article, including ssa.gov, irs.gov. Where a figure is an estimate or a worked example, the article says so.
