Suppose $500,000 has to cover $3,000 of spending every month. With no growth at all, the money runs out in just under 14 years. A steady 4% return extends the runway, but it still does not make the principal last forever.
This calculation withdraws $3,000 first, then applies one-twelfth of the annual return to the balance left in the account.
At 4%, $500,000 lasts about 20 years
Without any return, $500,000 divided by $3,000 gives about 166.6 months of spending. Adding a return stretches that timeline.
| Annual return | Spending runway | Total withdrawn |
|---|---|---|
| 0% | About 166.6 months · 13.8 years | $500,000 |
| 2% | About 195.0 months · 16.2 years | About $585,096 |
| 4% | About 242.4 months · 20.2 years | About $727,318 |
At 4%, total withdrawals reach about $727,318—roughly $227,318 more than the original balance. Returns on the money that remains cover part of each withdrawal. The rest still comes out of principal.
Why a 4% return cannot cover $3,000 a month
After the first $3,000 withdrawal, $497,000 remains. A monthly return of roughly 0.333% earns about $1,657, leaving the account at about $498,657 at the end of the month.
That is the basic problem: the account earns about $1,657 but pays out $3,000. The shortfall comes from principal, and the next month's return starts from a slightly smaller balance.
At a steady 4%, monthly spending would need to fall to about $1,661 to keep the $500,000 balance near its starting level.
The break-even return is just above 7.24%
To restore the account to $500,000 after a $3,000 withdrawal, the remaining $497,000 has to earn the full $3,000 during that month.
Entering 7.24% in the calculator produces a runway of roughly 106 years, but the balance still declines by a small amount. At 7.25%, the first month's return is about $3,002.71, so the calculator switches to “Principal can hold.”
Check the 7.25% scenario in the calculator
Real withdrawals are less predictable
The model holds spending at $3,000 and assumes the same return every month. Real costs can rise with inflation, and investment returns can arrive unevenly. Taxes, fees, and one-time expenses are also excluded.
Timing matters as well. A large loss early in retirement can shorten the runway even if the portfolio later recovers to a reasonable long-term average return.
This is a cash-flow illustration, not an investment recommendation or a promised return. It shows how a starting balance, fixed monthly spending, and a constant return interact.