What is a payout plan?

A payout plan, also called a withdrawal plan, reverses the savings plan. Instead of paying in each month, you have a fixed amount paid out to you each month. The capital not yet withdrawn stays invested and keeps earning a return. Unlike an annuity, the assets remain your property and pass to your heirs if you die. In return, there is no guarantee that the money lasts for the rest of your life.

How much money do you need to live off the returns alone?

Living off the returns alone, without touching the principal, takes considerably more capital than a plan that deliberately draws it down. Only the gap between return and inflation is available permanently. In my example with a 4% return and 2% inflation, that is not 2% but 1.96% a year, because the calculation is 1.04 divided by 1.02 minus 1. From $400,000 that gives $652.61 a month. If you only want to preserve the nominal value and ignore purchasing power, you get $858.26 a month. For $2,000 a month you need around $1,226,000 if you truly preserve your capital, and around $932,000 if you merely preserve its nominal value. The often-quoted limit at which a portfolio does not run dry within 60 years is admittedly as high as $948 a month. But after 60 years only $1,863.27 is left, and that is not capital preservation.

How long will $500,000 last in retirement?

That depends on the withdrawal rate, not on the amount. With a 4% return and 2% inflation, $500,000 lasts 40.4 years at $1,500 a month, 34.6 years at $1,666.67 a month, 27.0 years at $2,000 a month and only 20.3 years at $2,500 a month. The same durations result from $400,000 of capital with monthly amounts one fifth lower. Tax is not included in these figures.

How much can I pay myself without using up my assets too early?

Work backwards from the number of years you want to cover. With $400,000, a 4% return and 2% inflation, $1,696.94 a month lasts 25 years, $1,478.09 lasts 30 years, $1,323.23 lasts 35 years and $1,208.34 lasts 40 years. If you retire at 65 and want to plan up to 100, you end up at around $1,323 from $400,000. Tax comes on top of that.

Should I suspend or reduce my withdrawals in a crisis?

Every dollar you do not sell in a weak year stays invested and takes part in a recovery. In my simulation with a market slump at the start, a cash buffer covering two years of withdrawals alone adds around 15 months of duration, because no units are sold at depressed prices during that time. Whether you can stick to a cut in everyday life is another question. Fixed costs cannot be suspended, travel and purchases can.

What happens to my portfolio if I die early?

The remaining portfolio becomes part of your estate and passes to your heirs. That is the key difference from an immediate annuity, where the payments end on death. Whether inheritance tax or tax on price gains applies, and when, depends on the country. Check the rules where you live, or ask a tax advisor.

Retirement withdrawal plan: how long your money lasts in retirement

By Artur Neumann · Last updated: October 10, 2026

What a withdrawal plan answers

A withdrawal plan reverses the savings phase. Instead of paying money in each month, you take money out each month. The part not yet withdrawn stays invested and keeps working. The question is no longer what you end up with, but how long the pot lasts.

Three figures determine the result: the size of the monthly withdrawal, the return on the remaining capital and inflation, which makes your monthly amount more expensive every year. The duration is not a fourth input. It is the result.

Throughout this article I work with one example: a portfolio worth $400,000, a withdrawal of $1,600 a month, a 4% return on the remaining capital, 2% inflation. If you want to enter your own numbers, use the retirement withdrawal calculator. It uses exactly the mechanics I use here: withdrawal at the start of the month, then interest on the remainder, and once a year the monthly amount is raised by inflation.

For the example, the result is: the capital lasts 27.0 years. Over that time, $678,212.74 is paid out, around 1.7 times the starting amount. The difference comes from the return that keeps running on the part not yet withdrawn. The last monthly withdrawal is $2,677.47. That is not a higher standard of living, just compensation for inflation. After 26 years of 2% price increases, $2,677.47 in the 27th year has exactly the purchasing power of $1,600 today.

In the first year it still looks relaxed. $19,200 is withdrawn, and the return on the shrinking remaining capital brings in $15,586.49. The portfolio falls from $400,000 to $396,386.49, a drop of $3,613.51. After ten years $335,896.41 remains, after twenty years $184,900.77, after 25 years $60,916.39. The first twenty years cost $215,099.23 of capital, the last seven cost all the rest.

A concrete example: with a fixed withdrawal of $1,000 a month and no return, inflation, tax or costs, $300,000 lasts 25 years. In the article How long will $300,000 last in retirement? you can compare monthly amounts and calculate your own duration.

Calculating the other way round: a budget up to your planning age

If you already know the duration, the Die with Zero calculator is the right tool. It calculates a monthly budget up to the age you choose, or the savings rate this requires. The rest of the portfolio stays invested while you gradually use up capital. You can include a later pension and the remaining capital you want to keep. The age limit in the calculation is not a forecast of your lifespan.

It is the rate that decides, not the amount

The most common question is whether a certain amount is enough. The amount alone tells you nothing. What matters is the ratio of the annual withdrawal to the starting capital, the withdrawal rate.

$1,600 a month is $19,200 a year, or 4.8% of $400,000. The same rate gives exactly the same duration at any other scale: $200,000 with $800 a month, $400,000 with $1,600 and $1,000,000 with $4,000 all last 27.0 years. If you argue about amounts, you are arguing about the wrong number.

This is how the rate works with a 4% return and 2% inflation, using $400,000 as the example:

3.0%, or $1,000.00 a month: 54.4 years
3.5%, or $1,166.67 a month: 42.2 years
4.0%, or $1,333.33 a month: 34.6 years
4.5%, or $1,500.00 a month: 29.4 years
4.8%, or $1,600.00 a month: 27.0 years
5.0%, or $1,666.67 a month: 25.6 years
6.0%, or $2,000.00 a month: 20.3 years

The relationship is strongly curved. If you lower the rate from 5.0% to 4.5%, you gain 3.8 years. If you lower it from 3.5% to 3.0%, you gain 12.2 years. The same half percentage point therefore has more than three times the effect at the low end. For plans with the higher rates in the table, this means: a few hundred dollars less a month moves the end back by a few years, not by decades. What the well-known four percent rule means in this model is shown in the row with 34.6 years.

At this point two limits are regularly confused. The first is the limit at which the capital is only just no longer used up within the 60 simulated years. It is $948 a month, a rate of 2.8%. At $949 the pot is empty shortly before the 60 years are up. But that is not capital preservation. At $948, $1,863.27 is left after 60 years, around $568 in today’s purchasing power. Practically nothing of the $400,000 remains.

Real preservation starts much lower. For a nominal $400,000 to be there again after 60 years, you can withdraw $858.26 a month, a rate of 2.6%. If the purchasing power of the $400,000 is also to be preserved, it is $652.61 a month, a rate of 1.96%. These 1.96% are no coincidence. They are the real return, meaning what is left of a 4% return after 2% inflation. The gap is not 4 minus 2, but 1.04 divided by 1.02 minus 1. Only this part is available permanently. Everything above it eats into the capital.

Inflation is the number most often missing

Many plans use a fixed monthly amount over thirty years. That systematically underestimates what you need. If I leave out the inflation adjustment in the example, the same capital lasts 43.1 years instead of 27.0 years. The difference of 16.1 years comes solely from the fact that the amount in the plan stays constant, while your expenses do not.

It works just as clearly in the other direction. With 3% instead of 2% inflation, the duration falls from 27.0 to 23.6 years. The return works as a mirror image: with 2% instead of 4% it is 21.0 years, with 6%, on the other hand, 42.8 years. Return and inflation therefore have to be looked at together. What counts is the gap between the two.

Why the order of return years becomes dangerous when you draw down

Every calculator assumes an even return. Real portfolios never deliver that. In the withdrawal phase, what counts besides the average is above all when the weak years come. The technical term for this is sequence-of-returns risk.

I ran my own simulation for this, with the same monthly mechanics as the calculator, but with a return that changes from year to year. The sequence of returns over 30 years is: a 22% loss, a 9% loss, a 19% gain, then 27 years of 7% each. Together that makes 424.86% growth over 30 years, or 5.68% a year. I run this sequence in two orders. Starting capital, withdrawal and inflation stay identical, and from year 31 onwards I use the average of 5.68% in both cases.

Variant A, the three unusual years at the start. After two years, only $249,993.51 is left in the portfolio instead of $400,000. The capital is used up after 25.0 years, by which time $616,105.27 has been paid out.

Variant B, the same three years at the end. After two years, the portfolio holds $416,326.21, after 30 years still $476,328.26. The capital lasts 49.0 years and pays out $1,570,893.40 in total.

Same returns, same withdrawal, same average. The difference of 24 years comes solely from the order.

The reason lies in the units you sell. Assume a fund unit costs $100 at the start, so you hold 4,000 units. In variant A the price falls to $70.98 within two years. For the $38,784 withdrawn over these two years, you have to give up 478.0 units. At an unchanged price it would have been 387.8 units. The difference of just over 90 units never comes back, even if the price rises again later. These units are missing from every later recovery.

In the accumulation phase, the same slump works the other way round. There you buy more units for the same savings amount, and weak years at the start are even favorable. How both sides play out over decades is shown by the compound interest calculator for one side and the retirement withdrawal calculator for the other.

What a buffer really achieves

The usual advice is to keep two to three years of withdrawals in an instant-access savings account and to live off it in weak years instead of selling units. I calculated this for variant A. Two years of withdrawals are $19,200 plus $19,584, together $38,784. I take this amount out of the portfolio at the start, so the portfolio begins with $361,216. The buffer earns 2% in the savings account and covers months 1 to 24. Whatever is left after that goes back into the portfolio.

After two years, this leaves $257,150.95 available instead of $249,993.51, or $7,157.45 more. The duration rises from 25.0 to 26.3 years. That is around 15 months.

Fifteen months sounds modest, and that is exactly the honest finding. A buffer does not prevent the price loss. It only prevents you from locking it in. It becomes interesting through the counter-calculation: if the slump does not happen and the portfolio runs smoothly at 4%, the same buffer costs only 0.8 months of duration, because $38,784 earns 2% instead of 4%. Just under a month as the stake against well over a year of protection is a ratio worth thinking about.

Taxes depend on where you live

All figures so far are before taxes. How gains and withdrawals are taxed depends on the country you live in. If tax is due when you sell, you have to sell more than the net amount you need, and the money lasts less long. Enter that larger gross amount as the “Monthly withdrawal” in the calculator, and check the rules where you live or ask a tax advisor.

Three questions I am asked again and again

“Is my portfolio enough for $2,000 a month?” With $400,000 of capital, $2,000 is a rate of 6.0%. The money lasts 20.3 years before taxes. For $2,000 over 30 years you need around $541,000 in this model, for 35 years around $605,000.

“Can I live off the returns and never touch the capital?” Only with a much lower withdrawal. With $400,000, a 4% return and 2% inflation, $652.61 a month preserves the purchasing power of your capital, a rate of 1.96%. If you only want to keep the nominal $400,000, it is $858.26 a month. Everything above that eats into the capital.

“What happens if the money runs out at 85?” If you stop at 65 and withdraw $2,000 from $400,000, you face an empty portfolio at just over 85. A state or company pension then continues, the withdrawal plan does not. That is why the “Monthly withdrawal” field should not contain the amount you would like, but the actual gap between pension and expenses. You can work out that gap from your spending and a later pension in the financial independence calculator.

How I would set up a withdrawal plan

First, start with the gap, not with a target amount. Offset pensions, rental income and company pensions first.

Second, calculate three return assumptions instead of one. With $400,000 and $1,600, the range is between 21.0 years at 2% and 42.8 years at 6%. This range is the honest answer. A single number of years is not.

Third, check the rate, not the amount. It tells you in one number whether your plan sits in the flat or the steep part of the curve.

Fourth, add the tax before you judge the duration. The figures in the calculator are before taxes, so enter the gross amount you have to sell.

Fifth, keep a buffer for the first years and keep the monthly amount flexible. Both cost little and work exactly when it matters.

And sixth, recalculate once a year. A withdrawal plan is not a decision that holds for thirty years, but a calculation you adjust every year to the actual value of your portfolio.

Frequently asked questions

What is a payout plan?: A payout plan, also called a withdrawal plan, reverses the savings plan. Instead of paying in each month, you have a fixed amount paid out to you each month. The capital not yet withdrawn stays invested and keeps earning a return. Unlike an annuity, the assets remain your property and pass to your heirs if you die. In return, there is no guarantee that the money lasts for the rest of your life.
How much money do you need to live off the returns alone?: Living off the returns alone, without touching the principal, takes considerably more capital than a plan that deliberately draws it down. Only the gap between return and inflation is available permanently. In my example with a 4% return and 2% inflation, that is not 2% but 1.96% a year, because the calculation is 1.04 divided by 1.02 minus 1. From $400,000 that gives $652.61 a month. If you only want to preserve the nominal value and ignore purchasing power, you get $858.26 a month. For $2,000 a month you need around $1,226,000 if you truly preserve your capital, and around $932,000 if you merely preserve its nominal value. The often-quoted limit at which a portfolio does not run dry within 60 years is admittedly as high as $948 a month. But after 60 years only $1,863.27 is left, and that is not capital preservation.
How long will $500,000 last in retirement?: That depends on the withdrawal rate, not on the amount. With a 4% return and 2% inflation, $500,000 lasts 40.4 years at $1,500 a month, 34.6 years at $1,666.67 a month, 27.0 years at $2,000 a month and only 20.3 years at $2,500 a month. The same durations result from $400,000 of capital with monthly amounts one fifth lower. Tax is not included in these figures.
How much can I pay myself without using up my assets too early?: Work backwards from the number of years you want to cover. With $400,000, a 4% return and 2% inflation, $1,696.94 a month lasts 25 years, $1,478.09 lasts 30 years, $1,323.23 lasts 35 years and $1,208.34 lasts 40 years. If you retire at 65 and want to plan up to 100, you end up at around $1,323 from $400,000. Tax comes on top of that.
What are the risks of drawing down your savings?: Four risks act together. First, longevity risk, meaning you live longer than the plan lasts. Second, sequence-of-returns risk, meaning weak market years right at the start of your withdrawals. Third, inflation, which makes your monthly amount more expensive every year. Fourth, unplanned expenses such as long-term care or buying a car, which are not part of any monthly amount. Tax is not a risk but a certain deduction, and yet many plans leave it out.
Should I suspend or reduce my withdrawals in a crisis?: Every dollar you do not sell in a weak year stays invested and takes part in a recovery. In my simulation with a market slump at the start, a cash buffer covering two years of withdrawals alone adds around 15 months of duration, because no units are sold at depressed prices during that time. Whether you can stick to a cut in everyday life is another question. Fixed costs cannot be suspended, travel and purchases can.
How much tax do I pay when I sell ETF units in retirement?: That depends on the country you live in. All figures in this guide are before taxes. If tax is due on your sales, you have to sell more than the net amount you need, and the money lasts less long. Enter the gross amount you have to sell in the calculator, and check the rules where you live or ask a tax advisor.
What happens to my portfolio if I die early?: The remaining portfolio becomes part of your estate and passes to your heirs. That is the key difference from an immediate annuity, where the payments end on death. Whether inheritance tax or tax on price gains applies, and when, depends on the country. Check the rules where you live, or ask a tax advisor.

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Model calculation based on your inputs. Not investment, tax or legal advice and no promise of future performance. Check with a tax advisor whether something fits your situation. Full disclaimer.