Retirement & Savings
How much can $750,000 pay monthly without touching the capital?
Three quarters of a million dollars, a 6% return, 2.5% inflation and a plan that never spends the principal. The headline is the monthly amount that keeps the capital's real value intact; the breakdown shows how long $3,000 a month holds out instead.
Sustainable monthly withdrawal
$2,101
At $3,000 a month, it lasts
Portfolio when withdrawals start
First withdrawal, in that month's money
Monthly amount after 30 years, in future money
Compare scenarios
Pin these figures as scenario A, then change any input above to see the difference.
Balance under each withdrawal
Side by side
In Preserve capital, only the real return funds withdrawals, so each point of return matters even more. The 4% rule spends some capital over 30 years, which is why it can sit above the perpetual figure.
| Return assumption | Monthly, today's money | vs. yours |
|---|---|---|
| 4% return | $909 | -$1,193 |
| 5% return | $1,508 | -$594 |
| 6% (yours) | $2,101 | $0 |
| 7% return | $2,690 | +$589 |
| 8% return | $3,274 | +$1,172 |
| 4% rule of thumb | $2,500 | +$399 |
Year by year
| Year | Sustainable amount | Your amount |
|---|---|---|
| 0 | $750,000 | $750,000 |
| 1 | $750,000 | $739,050 |
| 2 | $750,000 | $727,726 |
| 3 | $750,000 | $716,015 |
| 4 | $750,000 | $703,904 |
| 5 | $750,000 | $691,380 |
| 6 | $750,000 | $678,428 |
| 7 | $750,000 | $665,034 |
| 8 | $750,000 | $651,182 |
| 9 | $750,000 | $636,858 |
Breakdown
| Withdrawal period | Forever, capital kept |
|---|---|
| Real return after inflation | 3.41% |
| Capital left at the end | $750,000 |
today's money · pre-tax
How this is calculated
Inflation-adjusted level annuity at a real monthly rate (exact Fisher relation), with a month-by-month depletion simulation
- Formula: W = P·i / (1 − (1+i)^−n), where i is the real monthly rate from (1 + nominal) / (1 + inflation), compounded by the twelfth root. When i = 0 it is P/n, and Preserve capital uses P·i. This is the standard time-value-of-money annuity (Brealey, Myers & Allen, Principles of Corporate Finance).
- The real return is the same every month. No market volatility is modelled and there is no sequence-of-returns risk.
- The default inflation of 2.5% is a deliberate margin above the 2% targets of the Federal Reserve, the Bank of Canada and the Bank of Korea.
- All figures are before tax and before investment fees.
- The 4% rule row comes from Bengen (1994), Determining Withdrawal Rates Using Historical Data, and from Cooley, Hubbard & Walz (1998), the Trinity study. It is a rule of thumb, not a guarantee.
- No Social Security, CPP, Korean National Pension or workplace pension income, and no currency conversion. This is an estimate, not financial advice.
Living on the real return alone
Some people do not want a plan that ends at zero. They want the money to outlive them, either to leave it to children, to cover a very long life without a second thought, or simply because watching the balance shrink is hard to live with. The Preserve capital plan is built for that wish. Instead of spreading the balance over a set number of years, it pays out only what the portfolio earns above inflation, so the capital keeps the same purchasing power at the end of every year as at the start. In dollars the balance still grows, because it has to keep pace with prices; in today's money it stays flat on the chart for as long as you care to look. The arithmetic is short. The calculator converts your 6% return and 2.5% inflation into a real monthly rate, compounding rather than dividing by twelve, and multiplies the balance by it. That product is the headline. Nothing else is spent, so the withdrawal period field no longer changes the amount; it only sets how many years the chart and the yearly table display. The price of permanence is a smaller cheque. A plan that is allowed to reach zero after thirty years can spend some principal every month on top of the real return, and the same three quarters of a million would pay noticeably more under it. Switch the plan back to Set period with everything else unchanged to see the difference directly. Which plan is right depends on whether you value a higher income now or a balance that stays whole, and there is no single correct answer. Many retirees end up somewhere between the two: spending a little principal in the later years, once the uncertainty about how long they will live has narrowed.
Why $3,000 a month eats into the capital here
The desired amount stays at $3,000, and the first row of the breakdown shows what happens if you take that instead of the preserve-capital figure. Anything above the real return has to come out of principal, so the balance starts to fall and eventually reaches zero; the row converts that into years and months. Read the two numbers together. The headline is the ceiling for never touching the capital, and the first row tells you how much time you buy by spending more. The comparison table's last row repeats the 4% rule of thumb for reference, which spends some principal over thirty years by design.
Spending down versus preserving capital
The set-period plan aims to use the whole balance by the end of the years you choose. That gives the largest monthly amount, but it leaves nothing at the end in today's money, and it assumes you know how long you need the money for. Preserve capital is the other choice. It only withdraws the real return each month, so the balance keeps its purchasing power indefinitely and can be left to someone else or kept as a reserve against a long life. The trade-off is a smaller monthly amount, often much smaller, and it depends entirely on the real return being positive. When your return does not beat inflation there is nothing to take in this mode without shrinking the capital, and the page says so in words instead of showing a negative number. Many people end up somewhere in between: they plan to spend down over a long period but keep a margin by withdrawing a little less than the calculator suggests, and they revisit the plan every year or two.
Why this is not the 4% rule
The four percent rule of thumb comes from William Bengen's 1994 study of historical US returns and from the 1998 Trinity study by Cooley, Hubbard and Walz. They asked a different question: what starting withdrawal, raised with inflation each year, would have survived every thirty-year stretch in the historical record, including the worst ones. Because it has to survive the bad sequences, the rule is deliberately conservative for an average stretch. This calculator does not look at history. It assumes the same real return every month for exactly your horizon, which is why its answer can sit above or below the rule. A long horizon pushes the sustainable figure down and a short one pushes it up, and a low return does the same as a long horizon. The comparison table shows the rule's figure as its last row so you can see the gap directly, and the chart draws the rule as its second line whenever you have not entered a monthly amount of your own.
Reading the return sensitivity table
The table under the chart reruns the whole calculation at your return minus two, minus one, plus one and plus two percentage points, keeping everything else the same. The middle row is your own figure, and the second column shows how far each alternative sits above or below it. Returns below zero are not tested, so if you enter a very low return the first rows repeat at zero rather than disappearing. The point of the table is humility. Nobody knows what a portfolio will return over thirty years, and the spread between the top and bottom rows is often larger than the effect of any other choice you make on this page. If the lower rows would leave you short, it is worth planning around them rather than around the figure you hope for. The last row repeats the four percent rule for reference, so the two ways of thinking about a withdrawal sit in one place.
What this calculator leaves out
Every figure on this page is before tax. In the United States and Canada, withdrawals from tax-deferred retirement accounts are generally taxed as income, while money from other account types may be taxed differently or not at all, and the rules depend on where you live and what else you earn. Because no verified tax table sits behind this page, it does not guess a rate. It also leaves out Social Security, CPP, Old Age Security and any workplace pension, which for many households cover a large share of spending and reduce how much the portfolio has to provide. Investment fees and fund expenses are not deducted either, so enter a return net of the costs you actually pay. Finally, the model ignores sequence-of-returns risk: a bad market in the first few years of withdrawals does more damage than the same bad years later on, and a constant-return model cannot show that. Treat the result as a planning estimate, not as advice.
Frequently asked questions
Does preserving capital mean my $750,000 balance never changes?
It means the balance keeps its purchasing power. In today's money the chart line stays flat, but in actual dollars the balance grows each year by roughly the inflation rate, because only the return above inflation is withdrawn and the rest is left to keep pace with prices. If returns come in below your assumption in a given year, the real value dips, which is why the sensitivity table matters even for a plan that never sells principal on purpose.
Is preserving capital the same as living off dividends and interest?
Not quite. Living off dividends and interest spends whatever cash the portfolio happens to pay, which depends on what you hold rather than on what it earns in total. Preserve capital here spends the total real return, price growth included, and nothing more. A portfolio with low dividends can still fund this plan by selling a small slice each month, and a high-yield portfolio may pay out more cash than the plan allows, which quietly erodes the real value of the capital.
Is the monthly amount before or after tax?
It is before tax. The calculator works out how much the portfolio itself can pay, and it does not know which accounts the money sits in, where you live or what other income you have, all of which change the tax on a withdrawal. In the United States and Canada, money taken from tax-deferred retirement accounts is usually taxed as ordinary income, while other accounts follow different rules. Because no verified tax table sits behind this page, it leaves tax out rather than guessing. Plan to set aside part of each withdrawal for tax, or ask a tax professional how your mix of accounts is treated.
Why does the withdrawal go up every year?
Because prices go up every year. A withdrawal that stays at the same dollar figure buys less and less as time passes, and over a retirement that can last thirty years or more the loss of purchasing power is large. The calculator therefore assumes you raise the amount you take by the inflation rate you entered, once a year, so that it keeps buying roughly the same things. The headline is shown in today's money for that reason. The breakdown shows the first withdrawal and the final year's withdrawal in the money of those years, which is why the later figure is larger.
Why is my answer different from the 4% rule?
The four percent rule answers a different question. Bengen in 1994 and the Trinity study in 1998 looked for the starting withdrawal that survived every thirty-year period in US market history, including the worst sequences of returns, so it is set to be safe in bad times. This calculator assumes a steady real return for exactly the horizon you choose. With a long horizon or a low return its figure can fall below the rule; with a short horizon or a high return it can rise above it. Both views are useful, and the comparison table shows them side by side.
What happens if the market falls early in retirement?
This is the biggest risk the calculator does not model. When markets fall sharply in the first years of withdrawals, you are selling investments at low prices to pay for living costs, and those shares are not there to recover when the market does. The same fall later in retirement does much less damage. A constant-return model cannot show this sequence-of-returns risk. Ways people manage it include keeping a cash buffer for a year or two of spending, withdrawing less after a bad year, and using the lower rows of the sensitivity table as the planning figure rather than the central estimate.
Should I choose Preserve capital, and what does the period do then?
Choose Preserve capital if you want the balance to keep its purchasing power indefinitely, for example to leave money to someone or to protect against a very long life. You will get a smaller monthly amount, because you only spend the real return and never touch the principal. The withdrawal period field stays active in this mode. It no longer changes the monthly figure, but it sets how many years the chart and the year-by-year table cover and which year the future-money row describes. If your return does not beat inflation, this mode shows zero and explains why.
Does this include Social Security, CPP or a pension?
No. The calculator only looks at the invested savings you enter, so Social Security, the Canada Pension Plan, Old Age Security and any workplace pension are all left out. For many retirees those payments cover a large share of their spending, which means the portfolio only has to fund the gap. A practical way to use the page is to work out your yearly spending, subtract the pension income you expect, and compare what is left with the monthly figure here. If a pension starts later than your withdrawals, the early years will need more from the portfolio than the later ones.
What return and inflation should I enter?
Enter a long-run return you would be comfortable defending, after the fees you actually pay, rather than a strong recent year. A mixed portfolio of stocks and bonds has historically earned less than an all-stock one, and cash earns less again. For inflation, the default of 2.5% sits a little above the 2% targets that the Federal Reserve and the Bank of Canada aim for, as a margin of caution. Try a lower return as well: the sensitivity table does this for you, and if the lower rows would leave you short it is wiser to plan around them.
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