Retirement Withdrawal Calculator: Estimate How Much You Can Withdraw From Your Savings

Shawn Plummer

CEO, The Annuity Expert

Are you nearing retirement and trying to figure out how much money you can safely spend each month from your retirement savings? If so, you need to check out our retirement withdrawal calculator. This tool will help you determine the right monthly budget for your golden years. With it, you can avoid running out of money in retirement!

Retirement Withdrawal Calculator

Annuities are the only retirement plan that guarantees withdrawals for the rest of your life, including after the savings accounts (401(k), traditional IRA, Roth IRA) runs out of money. That’s why our retirement withdrawal calculator uses an annuity with a guaranteed lifetime withdrawal benefit (GLWB). This annuity provides a secure retirement income that you can’t outlive. And it offers peace of mind knowing that you’ll have a steady stream of income in retirement – no matter how long you live. So, if you’re looking for a way to guarantee yourself a comfortable retirement, an annuity with a GLWB is the answer.

Note: You can purchase an annuity (with no tax penalties) with your 401(k), IRAs, retirement accounts, investments, and cash.

How Do I Calculate My Retirement Withdrawal?

Historically a financial advisor would provide investment advice by recommending the 4% rule for withdrawing from retirement savings for many years. Under this strategy, you would withdraw 4% of your savings the first year, and then each year after that, you would take out the same dollar amount plus an inflation adjustment. However, research has shown that the 4% rule is no longer valid.

The new recommended annual withdrawal rate is 2.80%. This lower rate is based on current market conditions and is designed to help people keep their savings invested for longer. Although adjusting your financial strategy may require adjustments, following the new withdrawal rate can help you make your retirement savings last.

How Much Can I Withdraw From Retirement Savings?

Many people invest their retirement savings intending to withdraw 4% annually. Suppose you’re thinking about using the investment strategy of investing your 401(k), Roth, or Traditional IRA. In that case, keeping your investment return minus any fees you may owe is important.

  • This strategy can help increase or decrease your income based on future performance. If your investment does well, you’ll see an increase in your income.
  • But if the future value hasn’t performed as well as you’d hoped, you may withdraw less than 4% annually.

Either way, it’s important to understand how this investment strategy can impact your overall financial picture.

Retirement Savings Withdrawal Comparison

Historically financial advisors recommend withdrawing 4% from your retirement accounts and adjusting for inflation. However, the 4% rule has been debunked as a safe withdrawal rate. New research concludes as low as 2.8% is the new rule. The following table compares rolling your retirement plan into a new annuity with withdrawing income yourself or utilizing an advisor.

FeaturesAnnuity401(k)IRARoth IRA
Withdrawal Percentage5.20% – 6.55%4%4%4%
Can Income Increase?YesYesYesYes
Can Income Decrease?NoYesYesYes
How Long Will Money Last?Lifetime30 Years+30 Years+30 Years+
Annual Fees0 – 1.50%1% – 4%1% – 4%1% – 4%
TaxationTaxable/Tax-FreeTaxableTaxableTax-Free
Death BenefitAccount BalanceAccount BalanceAccount BalanceAccount Balance

Example: A 60-year-old retiree starts withdrawing immediately from their $1 million portfolio, they would receive:

What Is The Best Retirement Withdrawal Strategy?

Many people nearing retirement age face a difficult decision – how to best withdraw their savings so that it lasts throughout their retirement.

  • For some, the stock market’s performance is a major concern, and they worry that they will lose everything if the market turns for the worse. However, annuities can provide a fixed income that is not affected by the stock market’s ups and downs.
  • In addition, annuities typically pay out more than the 4% withdrawal rate (up to 6% annual rate) that is often recommended, providing retirees with more income to cover their living expenses and pay bills.
  • Another advantage of using an annuity is providing accuracy for a predetermined retirement date. This retirement planning tool can be especially helpful for those who want to retire on a specific date or are worried about running out of money in their later years, regardless of the investment return.
  • Layering annuity income on top of Social Security benefits can also help to solve financial decisions regarding living expenses and bills.

Overall, annuities offer retirees a safe and reliable way to distribute their income while maintaining purchasing power and providing them with peace of mind about their future.

What Happens When You Withdraw Retirement Savings?

Although you can technically withdraw money from your retirement savings anytime, there are significant tax implications to consider before doing so. If you withdraw IRA or retirement plan assets before reaching age 59½, you will generally be subject to a 10% additional tax on the withdrawal amount. However, there are a few exceptions to this rule, such as if you are using the money to pay for qualified medical expenses or certain types of education expenses.

Once you reach age 59½, all withdrawals from your retirement account will be taxed at the ordinary income tax rate.

Remember that taking money out of your retirement account early can majorly impact your long-term financial security, so weighing your options carefully before making any financial decisions is important.

Retirement Withdrawal Rules

The IRS allows penalty-free withdrawals from most qualified retirement accounts after the age of 59 ½. Withdrawals taken before age 59 ½ will be subject to an additional 10% tax (early withdrawal penalty).

How Can I Withdraw Retirement Income Without A Penalty?

Most people think they have to wait until they’re retired to start withdrawing money from their retirement assets, but that’s not the case. The IRS actually allows penalty-free withdrawals from a retirement account after age 59 ½, as long as you meet certain conditions.

  • You can also withdraw money before retirement, but you’ll typically have to pay a 10% early withdrawal penalty. There are some exceptions to this rule, however.
  • For example, if you’re using the money to pay for qualified higher education expenses or to buy your first home, you can avoid the penalty.
  • Another way to avoid the penalty is to take what’s called a “substantially equal periodic payment.” This installment plan allows you to withdraw money from your IRA regularly without paying the early withdrawal penalty. You can set up a substantially equal periodic payment plan yourself or use a financial advisor to help you.

Either way, it’s important to remember that you’ll still have to pay taxes on the money you withdraw. So, if you’re considering taking money out of your IRA before retirement, make sure you understand the rules and regulations first.

Next Steps

If you’re nearing retirement, one of the most important things to consider is how much money you can safely spend each month. Our retirement withdrawal calculator is one of our self-help tools to help you determine your monthly budget for your golden years. With it, you can avoid running out of money in retirement! If you have questions about our calculator or want more information on retirement planning, please don’t hesitate to contact us for a quote, calculator results, investment advice, or tax advice. We are qualified professionals and be happy to help you plan a comfortable and worry-free retirement!

Estimate How Much You Can Withdraw From Your Ira Or 401K With Our Retirement Withdrawal Calculator

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Frequently Asked Questions

How long will 600k last in retirement?

If you begin by withdrawing $24,000 in Year One and expect to withdraw 4% annually, your savings balance earns a 5% annual rate of return, and inflation stays at 2.9%, then $600,000 would be enough money to last you through 30 years of retirement. However, an annuity will provide $36,600 or more for the rest of a person’s life on a guaranteed basis, regardless of the market’s past performance.

How long will $2,000,000 last retirement?

If you begin by withdrawing $80,000 in Year One and expect to withdraw 4% annually, your savings balance earns a 5% annual rate of return, and inflation stays at 2.9%, then $2,000,000 would be enough money to last you through 30 years of retirement. However, an annuity will provide $122,000 or more for the rest of a person’s life on a guaranteed basis, regardless of the market’s past performance.

How much is taxed on a 401k withdrawal?

The 401(k) provider is required to withhold 20% of the withdrawal amount for federal income tax when you take distributions and have the money sent to you directly.

How do I avoid 20% tax on my 401k withdrawal?

You can transfer your 401(k) balance to an IRA account and take the cash from there. Doing this will not have to pay the mandatory 20% federal income tax withholding. You can also choose when you would like to file your taxes rather than upon distributions.

Can I withdraw all my retirement money?

You can withdraw only as much money as you need to live in retirement and allow the rest of your nest egg to stay invested.

Which accounts should I withdraw from first in retirement?

Traditionally, tax experts advise that you withdraw funds from taxable accounts first, followed by tax-deferred accounts, and lastly, Roth accounts, which have no taxes incurred when withdrawn. The objective is to allow tax-deferred assets to compound over time.

How much money do you need to retire with a $100,000-a-year income?

To create a retirement income of $100,000 annually, you will need between $1.1 million and $1.7 million in savings.

Can I retire with 1.5 million in 401k?

You can withdraw up to 4% of your investment portfolio annually if you use the 4% rule as a guideline in retirement. A couple with $1.5 million in retirement savings may take out $60,000 yearly using this method. This withdrawal is combined with their Social Security, pension, and other income to ensure that they have enough cash for a comfortable existence. For illustrative purposes, the same $1,500,000 would allow a retiree to withdraw $91,500 annually with an annuity.

How do I pay less taxes on retirement withdrawals?

The most popular strategies for lowering taxes on retirement withdrawals include maximizing Roth accounts first, contributing to non-qualified annuities (only the interest is taxable income), deferring Social Security income, rolling over old 401(k)s to IRAs (avoid the 20% federal tax), and keeping your capital gains taxes low.

What are required minimum distributions?

The IRS requires you to withdraw a certain minimum distribution (RMD) from your retirement account(s). Law requires you to withdraw from tax-deferred retirement accounts like traditional IRAs and 401(k)s when you reach age 72.

What happens if I take out my retirement early?

You can take money out of your qualified retirement accounts whenever you want. But, if you’re younger than 59 1/2 and try to pull cash from an IRA or a retirement plan, you usually have to pay a 10% penalty on top of taxes (unless one of the other few rules applies).

What do I do with my IRA after I retire?

If you are 59½ years old, you can start taking distributions from a traditional IRA without paying any penalties. However, you will still have to pay income taxes on the distributions. IRA owners can defer taking their distributions until age 72.

What is the best age to retire?

At the age of 65 or earlier, many people retire. An individual’s retirement savings, health benefits, and social security may all influence when to quit working and vary by age. The ideal retirement age is when your Social Security and investment income equals at least 70% of your pre-retirement yearly wage.

What is the tax rate when withdrawing from an annuity?

Regular withdrawals are taxed at the ordinary tax rate.

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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