Money, Explained From the Inside

Tools / Plan ahead / Chapter 24 · Retirement Across Systems

Withdrawal rates

A withdrawal rate is the share of a pot taken in year one, then raised with inflation. It is a way of thinking about sustainability, not a promise.

1 · The idea

First-year income and sustainability

The first withdrawal is a share of the pot. Each following year it rises with inflation, while the remaining balance earns the return. The pot lasts if it stays above zero for the whole horizon.

The formula

Income = pot × withdrawal rate Next balance = (balance − withdrawal) × (1 + r)

withdrawal rate
share of the starting pot taken in year one
r
return while drawing
inflation
yearly increase in each withdrawal

2 · A worked example

A $500,000 pot at 4% gives $20,000 in year one and still holds $292,496 after 30 years. At 7% it gives $35,000 but runs out in year 18.

3 · Now use your own numbers

Change anything. The result updates instantly.

Try an example
First-year income
$20,000$1,667 a month
Still funded after 30 years
$292,496
RatePer yearPer month
3.0%$15,000$1,250
3.5%$17,500$1,458
4.0%$20,000$1,667
5.0%$25,000$2,083
6.0%$30,000$2,500

What this means

This simple model assumes a steady return. Real markets are uneven, and bad returns early do far more damage than the same returns late. Treat a single result as one scenario among many.

State pensions, annuities, property and other income change the picture.

Illustrative, not personal advice. Inspired by Chapter 24 · Retirement Across Systems of Money, Explained From the Inside. Your figures stay in this browser. Real products add terms, taxes and conditions that this simple model leaves out.

4 · Take care

What this tool can’t see

  • A steady return is an illustration. Poor returns early in retirement are far more damaging than the same returns later.
  • State pensions, annuities and property change the picture: see “Retirement readiness”.

5 · Go further

Where this fits

See it in a life:

GraceRetirement across systems

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