How much you need to live off your savings
A quick way to put a number on retirement is to divide the spending you will need to cover by a withdrawal rate. See how much the target changes with small changes in your spending or the rate.
Capital needed by spending and rate
With the same other income.
| Annual spending | At 3% | At 3.5% | At 4% |
|---|
How much you need to live off your savings
Enter the annual spending you want to cover, your other income, the withdrawal rate you choose and what you have already saved. The calculator gives you the capital needed, how much you are short and a table of how the target changes with your spending and the rate.
Example: if you want to spend 24,000 a year and will have 6,000 of other income, your savings must cover 18,000. At a 3% withdrawal rate you need 600,000; at 4%, 450,000. If you already have 150,000, you are 25% of the way there.
How it is calculated
- Spending to cover = annual spending − other income (pension, rent received…).
- Capital needed = spending to cover ÷ withdrawal rate.
- Shortfall = capital needed − what you already have.
Assumptions
- It is an indicative division, not a simulation: it does not guarantee the money will last a lifetime.
- The withdrawal rate is your own assumption: the lower it is, the more capital you need and the bigger your safety margin.
Frequently asked questions
How do you calculate how much you need to retire?
Annual spending your savings must cover ÷ withdrawal rate. With 18,000 and 3%: 18,000 ÷ 0.03 = 600,000.
What is the withdrawal rate?
The share of your savings you would withdraw in the first year. It is an assumption: the lower it is, the more capital you need, but the more likely the money is to last.
Which withdrawal rate should I use?
It depends on how many years the money must last and how it is invested. A widely quoted US guideline is 4%; many people prefer lower figures for more margin. Try several in the table.
Why does the target change so much with small changes?
Because every unit of annual spending is multiplied: at 3%, each extra 1,000 of yearly spending requires 33,333 more capital.
Does it guarantee the money will last a lifetime?
No: it is an indicative division. To see year by year how long it lasts with returns and inflation, use the how long will my savings last calculator.