How much can I spend in retirement? ($800k at 62, worked example)

The question most people have at retirement isn't "how long will my savings last" in the abstract. It's how much they can spend each year, with Social Security starting at some point and tax taken off every withdrawal from a 401(k) or IRA. Here's one example, worked through with the sample file of our retirement drawdown planner. Every figure comes from the same model: a year-by-year drawdown, with the most you can spend found by a search over that loop. The person is an example: use your own numbers.

The example

Age withdrawals start	62
Savings at 62	$800,000
Social Security from 67	$28,000 a year in today's dollars
Investment return / inflation	6% / 3% a year
Tax on withdrawals from savings	12%
Plan to last to	95

Spending is in today's dollars, after tax, and rises with inflation. Each year, whatever Social Security doesn't cover comes out of savings, grossed up for the tax, at the start of the year; the rest grows at the return.

$60,000 a year runs out at 86. $54,427 lasts to 95.

At $60,000 a year the balance is $639,470 at 67, when Social Security starts, $374,334 at 80 and $109,510 at 85, and it runs out at 86. The most this person can spend and still last to 95 is $54,427 a year. In the first year that means withdrawing $61,849, 7.7% of the savings, far above the "4% rule". That works here because the withdrawals drop once Social Security starts at 67.

Age the savings run out, by spending

Spending per year	Savings run out at
$45,000	not before 100
$50,000	108
$54,000	95
$55,000	93
$60,000	86
$65,000	82
$70,000	78

The last few thousand dollars of spending cost the most years: going from $54,000 to $60,000 brings the end forward by nine years.

Most you can spend to last to 95, by savings

Savings at 62	Spending per year
$300,000	$34,088
$500,000	$42,224
$800,000	$54,427
$1,000,000	$62,563
$1,500,000	$82,901
$2,000,000	$103,240

Each extra $100,000 of savings adds about $4,070 a year of spending in this example. Without any Social Security, $800,000 would support $32,542 a year to 95.

What else moves it

Change from the example	Most you can spend to 95
Plan to 85 / 90 / 100 instead of 95	$61,477 / $57,290 / $52,364
Return 4% / 5% / 7% instead of 6%	$47,958 / $51,076 / $57,991
Tax on withdrawals 0% (Roth) / 22%	$58,865 / $50,729
Claim Social Security at 62 ($19,600) / 70 ($34,720)	$52,142 / $55,625

The claiming amounts use the standard reductions and credits for a full retirement age of 67 (70% at 62, 124% at 70). Claiming at 70 supports about $1,200 a year more spending than claiming at 67 in this example, if the person lives to 95; the Social Security claiming calculator shows the break-even ages.

Try your own numbers

The free retirement savings calculator is pre-filled with this example. The spreadsheet adds the year-by-year table: balance, spending, income, withdrawal and any shortfall for 60 years. A fixed return every year is a simplification: real returns vary, and a bad run early in retirement hurts more than the same run later. Not financial or tax advice.