How To Make Your Money Last 30 Years After Retiring at 65

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The biggest financial concern for most retirees is outliving their money. As longevity increases, this is becoming a real concern. Decades ago, most retirees only had to finance a 10- or maybe 20-year retirement. But with more and more seniors living into their 90s and beyond, a 30-year retirement is no longer uncommon. 

To ensure this doesn’t happen to you, you’ll have to understand how the math of retirement works. The two most critical factors in terms of portfolio longevity are your withdrawal rate and your portfolio’s rate of return — either of which could dramatically shorten or extend how long your savings last.

With that in mind, here are retirement withdrawal calculations using three different starting balances — $500,000, $750,000 and $1 million. For comparison, each was tested using annual returns of 4%, 5% and 6%, along with withdrawal rates of 4% and 5%. 

The $500,000 Portfolio

Here’s a look at how long a $500,000 portfolio will last with a 4% annual withdrawal rate, increased by 2% annually for inflation:

• Initial annual withdrawal: $20,000
• 4% return: 25 to 26 years
• 5% return: 29 to 30 years 
• 6% return: 33 to 34 years

End result: A 5% return should be nearly sufficient to reach the targeted 30-year withdrawal window.

With a 5% withdrawal rate, the math changes:

• Initial annual withdrawal: $25,000
• 4% return: 21 to 22 years
• 5% return: 24 to 25 years
• 6% return: 28 to 29 years

End result: It’s almost impossible to make a $500,000 portfolio last 30 years unless you earn very high returns consistently over time.

The $750,000 Portfolio

With a larger starting amount, it’s much easier for a portfolio to reach the 30-year mark, particularly with a 4% withdrawal rate:

• Initial annual withdrawal: $30,000
• 4% return: 27 to 28 years
• 5% return: 31 to 32 years
• 6% return: 36 to 37 years

End result: Even at a modest 4% annual return, the $750,000 portfolio can nearly reach 30 years. With a 5% return, it makes it easily.

A 5% withdrawal rate dramatically shortens the life of even a $750,000 portfolio:

• Initial annual withdrawal: $37,500
• 4% return: 23 to 24 years
• 5% return: 26 to 27 years
• 6% return: 30 to 31 years

End result: You’ll have to earn close to 6% on your $750,000 portfolio to make it last the desired 30 years.

The $1 Million Portfolio

Things get easier once your nest egg reaches $1 million, but modest returns still aren’t enough to stretch its duration to 30 years:

• Initial annual withdrawal: $40,000
• 4% return: 28 to 29 years
• 5% return: 32 to 33 years
• 6% return: 38 to 39 years

End result: You’ll need to earn more than a conservative 4% annually, even with a $1 million, to have a 30-year retirement.

With a 5% withdrawal rate, even a $1 million account requires a fairly high average annual return to last three decades:

• Initial annual withdrawal: $50,000
• 4% return: 24 to 25 years
• 5% return: 28 to 29 years
• 6% return: 33 to 34 years

End result: With a 5% withdrawal rate, returns must exceed 5% annually in order to ensure a 30-year lifespan for your portfolio. 

What It All Means

Putting it all together, it doesn’t really matter how big your portfolio is, at least on a percentage basis. What matters are your investment return and your withdrawal rate.

With a 6% average annual return, your nest egg can almost always reach 30 years. In most cases, even a 5% return is enough.

But that’s with a 4% annual withdrawal rate. If you boost that to 5%, your money goes faster, and there’s no way around that. The only way to counter that is to increase your rate of return. Even with a $1 million portfolio, a 5% withdrawal rate is flirting with disaster. You’ll likely need close to a 6% average annual return to ensure portfolio longevity, and/or to consistently withdraw under 3%.

The Bottom Line

Withdrawal weighs as heavily on your subsistence as accrual. If you can keep your withdrawal rate to 4% or lower and earn at least 5% in average annual returns, your savings have a good chance of lasting at least 30 years, regardless of the amount you start with. But if you bump up your withdrawal rate to 5%, you’ll generally need to earn 6% or more. 

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