Investment Withdrawal Calculator

While you are accumulating, the order of returns is irrelevant: the same set of annual returns in any order produces the same final balance. Once you are withdrawing, order is everything.

A poor first few years forces you to sell more units at depressed prices to fund the same income, permanently reducing the capital that participates in the recovery. Two portfolios with identical average returns can produce entirely different outcomes purely because one had its bad years early. This is sequence-of-returns risk, and it is the reason retirement planning is harder than accumulation planning.

The 4% rule comes from the Trinity study: withdraw 4% of the starting balance in year one, increase that dollar amount by inflation each year thereafter, and a 50/50 to 75/25 stock-bond portfolio survived every historical 30-year US period tested.

What it does not claim is that 4% is safe forever, safe in every country, or safe for a 45-year retirement. It also assumes rigid inflation-adjusted spending, which no real retiree does. Treat it as a useful starting anchor and stress-test around it rather than as a law.

The single most effective defence against a bad sequence is spending less after a bad year. Skipping the inflation increase after a down year, or capping withdrawals at a percentage band of the current balance, dramatically improves survival rates — often more than any change to the asset allocation.

The practical version is a floor-and-ceiling rule: never cut real spending by more than 10% in a bad year, never raise it by more than 10% after a good one. That preserves both the portfolio and the plan's liveability.

Holding one to three years of spending in cash or short Treasuries lets you fund withdrawals from the buffer during a drawdown instead of selling equities into it. The buffer earns less over time, which is a genuine cost — but it converts a forced sale into a choice.

A bond ladder does the same job with more structure: instruments maturing each year for the next five to ten, so that near-term spending is already matched to a known payment. Both approaches accept slightly lower expected returns to remove the worst outcomes, which is usually the right trade in decumulation.

Which account you draw from changes the tax bill materially. The conventional order — taxable first, then tax-deferred, then Roth — maximises the time that tax-advantaged money keeps compounding.

It is not always optimal. Drawing some tax-deferred money in low-income early retirement years, or doing Roth conversions before Social Security and required minimum distributions begin, can prevent a much higher bracket later. Required minimum distributions on traditional accounts begin in your seventies and are not optional, so a large untouched traditional balance is a deferred tax problem, not an avoided one.