Savings of 300,000 earning an assumed 5% a year last until year 35 if 1,500 a month is taken out and never raised. Raising the withdrawal by 3% a year, to keep up with prices rising at that rate, makes them run out in year 21.
Each raise applies to an amount that has already been raised, so the withdrawals grow by more every year, while the balance they come from shrinks.
Four rates of increase
The same savings, the same starting withdrawal and the same assumed return in every row:
| Withdrawal raised each year by | Runs out in year | Total taken out |
|---|---|---|
| 0% | 35 | 622,178 |
| 2% | 24 | 523,547 |
| 3% | 21 | 500,103 |
| 4% | 19 | 482,932 |
What the example leaves out
The return is the same every year here. Real returns vary, and a fall in the early years shortens how long the money lasts more than the same fall later on. Taxes and fees are left out.