How Long Will Your Savings Last Calculator
Use this calculator to estimate how many months or years your current savings will last, considering your desired monthly withdrawals, potential investment growth, and the impact of inflation.
Understanding Your Savings Longevity
Knowing how long your savings will last is a critical component of financial planning, especially for retirement, early retirement, or any period where you'll be relying on your accumulated wealth. This calculator helps you visualize the lifespan of your nest egg under various assumptions.
Key Factors Explained:
- Current Savings Balance: This is the total amount of money you currently have saved and available for withdrawal. It's your starting point.
- Desired Monthly Withdrawal: This represents the amount of money you plan to spend or withdraw from your savings each month. Be realistic about your living expenses.
- Expected Annual Investment Return: This is the average annual percentage growth you anticipate your remaining savings will achieve. Even if you're withdrawing, the money still invested can continue to grow, extending its lifespan. A higher return rate generally means your savings last longer.
- Expected Annual Inflation Rate: Inflation erodes the purchasing power of money over time. This calculator accounts for inflation by increasing your "desired monthly withdrawal" amount each year to maintain the same purchasing power. For example, if you need $3,000 today, you'll need more than $3,000 in 10 years to buy the same goods and services.
How the Calculation Works
The calculator performs a month-by-month simulation. Each month, it first applies the investment growth to your remaining savings, then subtracts your inflation-adjusted monthly withdrawal. This process repeats until your savings balance drops to zero or below. It's an iterative process that provides a more accurate picture than simple division, especially when considering investment returns and inflation.
Why This Matters
This tool is invaluable for:
- Retirement Planning: Determine if your current savings are sufficient for your desired retirement age and lifestyle.
- Financial Independence/Early Retirement: Project how long you can live off your investments if you stop working.
- Budgeting: Understand the impact of increasing or decreasing your monthly spending on your savings' longevity.
- Investment Strategy: See how different investment return assumptions affect your financial runway.
Realistic Examples:
Let's consider a few scenarios:
- Scenario 1: Moderate Savings, Moderate Withdrawal, Growth & Inflation
If you have $500,000 in savings, withdraw $3,000 per month, expect a 6% annual return, and 3% inflation, your savings might last approximately 25-30 years. The investment growth helps offset withdrawals and inflation. - Scenario 2: High Withdrawal, No Growth, No Inflation
If you have $200,000 and withdraw $4,000 per month with 0% return and 0% inflation, your savings would last exactly 50 months (200,000 / 4,000). This simple division highlights the importance of growth and inflation. - Scenario 3: Low Withdrawal, High Growth, High Inflation
Even with high growth, high inflation can significantly reduce the longevity of your savings if your withdrawals are not adjusted accordingly. For example, a 10% return might seem great, but if inflation is 7%, your real return is only 3%.
Remember, these are estimates. Actual results will vary based on market performance, actual inflation, and your spending habits. It's always wise to build in a buffer for unexpected expenses.