How long your money lasts depends on three things: how much you have, how much you spend each year, and what your remaining balance earns (or loses) while you’re spending it down. A simple starting point is to divide your total savings by your annual spending. If you have $500,000 and spend $40,000 a year, that’s roughly 12.5 years with no growth at all. But investment returns, inflation, taxes, and the unpredictable timing of market swings all push that number higher or lower, sometimes dramatically.
The Withdrawal Rate That Drives Everything
The most widely used benchmark for retirement spending is the “safe withdrawal rate,” which tells you what percentage of your portfolio you can take out in year one, then adjust for inflation each year after, without running out of money over a 30-year period. Morningstar’s 2025 research puts that number at 3.9%, assuming a 90% probability of still having funds at the end of 30 years.
In practical terms, a 3.9% withdrawal rate means you need roughly $25 in savings for every $1 of annual spending your portfolio needs to cover. If Social Security and any pensions handle $30,000 of your expenses and you need another $40,000 from savings, you’d want about $1,025,000 invested at retirement to feel confident it lasts three decades. Lower your spending or increase your guaranteed income, and that number drops.
That 3.9% figure assumes you take the same inflation-adjusted dollar amount every year regardless of how your portfolio performs. If you’re willing to be more flexible with your spending, you can start with a higher withdrawal rate and still have strong odds of not running out.
Flexible Spending Strategies
Rigid spending plans are the most conservative approach because they have to survive every possible market scenario. Flexible strategies let you pull back in bad years and spend more in good ones, which means your money can support a higher starting withdrawal rate.
- Constant percentage method: You withdraw the same percentage of your portfolio’s current balance each year. If your portfolio drops 15%, your withdrawal drops 15% too. Your money technically never runs out, but your income can swing sharply from year to year.
- Endowment method: You base your withdrawal on the average portfolio value over the past 10 years. This smooths out the ups and downs so your income doesn’t jump around as much as the constant percentage approach.
- Guardrails method: You set upper and lower spending boundaries. When your portfolio grows enough, you give yourself a raise. When it drops below a threshold, you cut spending. This works especially well when paired with a predictable income floor like Social Security or a pension.
Each of these supports a higher starting withdrawal rate than 3.9% because they automatically adjust when markets cooperate or struggle. The trade-off is income variability: you need to be comfortable spending less in down years.
Why Early Market Losses Are So Dangerous
The order in which your investment returns arrive matters enormously, a concept known as sequence of returns risk. Two retirees can earn the exact same average annual return over 30 years, but if one hits a bear market in the first three years while withdrawing money and the other hits it in year 25, their outcomes will be wildly different.
When you withdraw money from a declining portfolio, you’re selling more shares at lower prices to generate the same income. Those shares are gone permanently and can’t participate in the eventual recovery. A 30% market drop in year two of retirement is far more damaging than the same drop in year 20, because the early loss compounds against you for decades. If you retire into a prolonged downturn, your portfolio may never fully recover even when markets bounce back.
This is one reason holding one to three years of spending in cash or short-term bonds can extend your portfolio’s life. It gives you a buffer to avoid selling stocks at depressed prices during early downturns.
How Spending Actually Changes Over Time
Most people don’t spend the same amount every year of retirement. Spending tends to follow what planners call the “retirement spending smile,” a U-shaped curve with three distinct phases.
In early retirement, spending is typically at its highest. You’re traveling, dining out, renovating the house, picking up hobbies, and generally doing all the things you postponed during your working years. This is the most active and often the most expensive phase.
In mid-retirement, spending naturally declines. Energy levels dip, travel slows down, and daily life settles into more affordable routines. Many retirees find their expenses drop meaningfully during this stretch, sometimes by 20% or more compared to the early years.
In late retirement, spending climbs again, driven almost entirely by healthcare. Regular medical visits, prescription medications, and especially long-term care needs can push costs well above what you were spending in your quieter middle years. Healthcare costs are one of the most predictable large expenses in retirement, which means you can plan for them even if you can’t avoid them.
Understanding this pattern matters because a flat-spending projection may overestimate how much you need for the middle years and underestimate how much you need at the end. Budgeting more heavily for healthcare in your late 70s and 80s, while being willing to spend a bit more freely in your 60s, can actually be more realistic than treating every year the same.
Which Accounts You Tap First Matters
If you have savings spread across different account types, the order in which you withdraw can meaningfully affect how long your money lasts. Taxes are the hidden drain: every dollar you pay in unnecessary taxes is a dollar that’s no longer invested and growing.
The traditional approach is to spend from taxable brokerage accounts first, then tax-deferred accounts like traditional IRAs and 401(k)s, and finally Roth accounts where withdrawals are tax-free. The logic is that your tax-advantaged money gets more time to grow.
A more nuanced approach that many planners now favor is proportional withdrawals: pulling from each account type based on its share of your total savings. If 40% of your money is in a traditional IRA, 40% of each year’s withdrawal comes from there. This tends to produce a more stable tax bill over time and can result in lower lifetime taxes and higher after-tax income compared to the traditional sequence.
If you’re in a low-income year, especially early in retirement before Social Security kicks in, you may qualify for the 0% capital gains tax rate on long-term investment gains. Strategically harvesting those gains while you’re in a low bracket lets you pull money out of taxable accounts without any federal tax at all. Once those accounts are spent down, you can switch to the proportional approach for the remaining tax-deferred and Roth funds.
Running Your Own Numbers
A quick estimate works like this: take your total invested savings and multiply by 0.039 (the 3.9% withdrawal rate). That gives you a rough annual income your portfolio can sustain for 30 years with a high probability of not running out. Add in Social Security and any pension income to get your total.
If you need $60,000 a year in total retirement income and Social Security covers $24,000, your portfolio needs to generate $36,000. Dividing $36,000 by 0.039 means you’d want about $923,000 saved. If you have more than that, your money will likely last longer than 30 years. If you have less, you’ll either need to spend less, work longer, or adopt a flexible withdrawal strategy that adjusts with market conditions.
For a more precise picture, factor in your actual age and time horizon. A 50-year-old retiring early might need money to last 40 or 45 years, which calls for a lower withdrawal rate, closer to 3.3% or 3.5%. A 70-year-old with a 20-year horizon can safely withdraw a higher percentage. The longer your money needs to last, the more conservative your spending rate should be, because you’re exposed to more years of potential market downturns and inflation erosion.
Online retirement calculators that use Monte Carlo simulations (running thousands of random market scenarios to see how often your money survives) give the most realistic picture. They account for the sequence of returns risk that simple division ignores. Many brokerage firms offer these tools for free.