How Long Will Your Savings Last in Retirement?

"Will I run out of money?" is the question that keeps retirees up at night. The answer depends on a tug-of-war between two forces: the growth your investments earn, and the withdrawals (rising with inflation) that you take out. Get the balance right and your savings can last indefinitely; get it wrong and a pot that looked enormous can drain faster than you'd expect.

The drawdown maths

Each year in retirement, your balance does two things: it grows by your investment return, and it shrinks by your withdrawal. If growth exceeds the withdrawal, the balance rises; if the withdrawal exceeds growth, it falls. Because your withdrawal needs to rise with inflation to maintain your spending power, the bar keeps getting higher even as your balance may be shrinking.

A simple way to see the tipping point: if your portfolio earns a 5% real (after-inflation) return and you withdraw 4% of the starting balance, growth covers the withdrawal and the pot can last more or less forever. Withdraw 7% and you're draining capital every year — the money won't last.

Worked example

A $500,000 pot, withdrawing $3,000 a month ($36,000 a year, a 7.2% starting rate), earning 5% a year with 2% inflation, lasts roughly 18 years. Cut the withdrawal to $1,500 a month and the picture flips entirely — growth outpaces the inflation-adjusted withdrawals and the balance keeps rising. The withdrawal rate, far more than the size of the pot, decides the outcome.

The 4% rule

The best-known guideline is the 4% rule: withdraw 4% of your savings in year one, then increase that dollar amount by inflation each year. It comes from the "Trinity study" and William Bengen's research, which found that across most historical 30-year periods, a 4% inflation-adjusted withdrawal survived. It's a sensible anchor, but treat it as a starting point, not a law:

• It was designed for a roughly 30-year retirement. Retire at 50 and you may need a lower rate, like 3.25–3.5%.
• It assumes a specific stock/bond mix and US market history — not guaranteed to repeat.
• It's a "set and forget" rule; staying flexible usually lets you spend more safely.

Sequence-of-returns risk

Here's what a fixed-return projection can't show, and why averages can deceive. Sequence-of-returns risk is the danger of poor returns in the early years of retirement. If the market falls 30% in your first two years while you're withdrawing, you're selling assets at depressed prices and locking in losses you never recover. Two retirees with the same average return over 30 years can end up worlds apart depending on whether the bad years came first or last. This is why many advisers suggest holding a cash buffer (a year or two of expenses) to avoid selling into a downturn early on.

How to make savings last longer

• Lower the withdrawal rate. The single biggest lever. Even dropping from 5% to 4% can turn a finite pot into a near-perpetual one.
• Stay flexible. Trimming spending in down years dramatically improves survival odds versus rigid inflation-adjusted withdrawals.
• Delay state benefits. Deferring Social Security, the State Pension, or CPP/OAS often boosts the guaranteed, inflation-linked income that reduces what you draw from savings.
• Keep a cash buffer. One to two years of expenses in cash lets you ride out a crash without selling investments at the bottom.
• Mind the order. Most retirees naturally spend more early ("go-go years") and less later, which a flat withdrawal model understates.

If your savings comfortably outlast your plans, you may already be at a powerful milestone — see the Coast FIRE calculator and the FIRE movement explained.