Income From $1 Million at Different Withdrawal Rates
| Rate | Per year | Per month | Per week |
|---|---|---|---|
| 3% | $30,000 | $2,500 | $577 |
| 3.5% | $35,000 | $2,917 | $673 |
| 4% | $40,000 | $3,333 | $769 |
| 4.5% | $45,000 | $3,750 | $865 |
| 5% | $50,000 | $4,167 | $962 |
| 6% | $60,000 | $5,000 | $1,154 |
All amounts are before tax. To work backwards from a target, divide the yearly income you want by the rate: $60,000 a year at 4% needs $1.5 million, and $600,000 of capital at 4% supports about $24,000 a year.
Where the Income Comes From
- Withdrawals from a diversified portfolio: the 4% rule assumes you sell some investments each year, not that you live only on dividends or interest.
- Dividends: broad U.S. stock index funds currently yield far less than 4% (the S&P 500 has yielded roughly 1–1.5% in recent years); higher-yield dividend funds pay more but are less diversified.
- Interest: savings accounts, Treasury bills, CDs and bonds pay whatever current rates are. Rates move with the economy, so a yield available today is not locked in for decades unless you buy long-term bonds.
- Annuities: an insurer pays a guaranteed income in exchange for a lump sum. Payouts depend on age, rates and options chosen; get quotes from several providers.
Why 4% and Not 7%?
Even if a portfolio averages 7% a year, it does not earn 7% every year. A big loss early in retirement, while you are also withdrawing, can permanently shrink the balance — this is called sequence-of-returns risk. William Bengen's 1994 study found 4% (raised each year for inflation) was the highest starting rate that survived every 30-year period in U.S. history he tested, and the 1998 Trinity study reached a similar conclusion. Retiring early (a 40–50 year horizon) usually calls for a lower rate such as 3–3.5%.
How This Calculator Works
Year one's withdrawal is the portfolio size times the withdrawal rate. Each later year the withdrawal grows by the inflation rate. The remaining balance earns the average return once a year. "How long it lasts" is the number of full years of withdrawals before the balance runs out (capped at 100). Real returns vary from year to year, so treat the result as an estimate.
General information only, not financial or tax advice. Consider a fee-only financial planner before relying on a withdrawal strategy.