How Long Will My Savings or Retirement Money Last?
Calculating how long your money will last in retirement or during a gap in employment requires more than just dividing your balance by your monthly withdrawal. Because your remaining balance continues to earn interest, your money will last longer than simple math suggests. This calculation uses the standard financial NPER (Number of Periods) formula.
- W = Your monthly withdrawal amount.
- P = Your principal (starting balance).
- r = Your monthly interest rate (Annual Interest Rate ÷ 12).
- ln = Natural logarithm.
Note: If your monthly interest earnings (P × r) are equal to or greater than your monthly withdrawal (W), your money will mathematically last forever.
Understanding this concept is crucial for retirement planning. If your investments yield a 5% annual return, drawing down your nest egg takes significantly longer because the remaining principal is constantly generating new funds to offset your withdrawals.
| Annual Interest Rate | Time Until Depleted | Total Amount Withdrawn |
|---|---|---|
| 0% (Under the mattress) | 8.3 Years | $100,000 |
| 2% (High Yield Savings) | 9.1 Years | $109,200 |
| 5% (Conservative Portfolio) | 10.8 Years | $130,000 |
| 8% (Growth Portfolio) | 13.7 Years | $164,700 |
Frequently Asked Questions
What is the "4% Rule" in retirement?
The 4% rule is a widely used rule of thumb in retirement planning. It suggests that if you withdraw 4% of your starting retirement portfolio annually (adjusted for inflation each year), your money is highly likely to last for at least 30 years, assuming a historically balanced portfolio of stocks and bonds.
Does this calculator account for inflation?
No, this specific calculator figures out nominal depletion based on fixed withdrawals. If you want to account for inflation, a simple trick is to reduce your expected Annual Interest Rate by the expected inflation rate (e.g., if you expect 7% returns and 3% inflation, enter 4% for your interest rate).
What happens if my result says "Forever"?
If the calculator says your money will last "Forever," it means the amount of interest your balance earns each month is strictly greater than the amount you are withdrawing. You are living purely off the interest without ever touching the principal.