What is sequence of returns risk and why does it matter?

Sequence of returns risk is the danger that poor investment returns early in retirement will significantly reduce your portfolio's longevity. If you experience a market crash in your first few retirement years while taking withdrawals, your portfolio may never recover—even if average returns are good. Mitigation strategies include keeping 2-3 years of expenses in cash, reducing withdrawals during downturns, and delaying Social Security.

How does inflation affect my retirement withdrawal strategy?

Inflation erodes purchasing power over time. If you withdraw a fixed amount, you'll be able to buy less each year. At 3% inflation, $1,000 today will only buy $744 worth of goods in 10 years. Most retirees should increase withdrawals with inflation to maintain their lifestyle, but this means your portfolio needs higher returns or you'll deplete it faster.

Should I adjust my withdrawals based on market performance?

Yes, dynamic withdrawal strategies can extend portfolio longevity. Consider reducing withdrawals by 10-20% during market downturns and increasing them during strong years. This flexibility can significantly increase your portfolio's chances of lasting throughout retirement. Other options include using a percentage-based approach (withdraw 4% of current balance each year) rather than fixed dollar amounts.

What if my annuity calculator shows I'll run out of money?

You have several options: 1) Reduce withdrawal amounts, 2) Work part-time to supplement income, 3) Delay Social Security to increase guaranteed income, 4) Adjust your investment strategy for higher returns (with appropriate risk), 5) Consider annuities for guaranteed lifetime income, or 6) Explore reverse mortgages if you own a home. The key is identifying the issue early so you have time to adjust.

Annuity Duration Calculator

Calculate how long your annuity or retirement savings will last with regular withdrawals

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Your Money Will Last

100.0 years

(100 years, 0 months)

Depletion Date

October 2125

Total Withdrawn

$400,000

Investment Earnings

-$400,000

Understanding Annuity Duration

Annuity duration is the length of time your retirement savings will last based on your withdrawal rate and expected returns. This calculator helps you determine if your withdrawal strategy is sustainable throughout your retirement years.

The key to successful retirement planning is finding the right balance between enjoying your retirement and ensuring your money lasts as long as you need it. Understanding duration helps you make informed decisions about withdrawal rates and investment strategies.

💡 Key Concept: The 4% Rule

The 4% rule suggests withdrawing 4% of your portfolio in year 1, then adjusting for inflation. Historically, this has a 95% success rate over 30 years.Source: Bengen, W. P. (1994). "Determining Withdrawal Rates Using Historical Data"

Understanding Withdrawal Rates

Your withdrawal rate is the percentage of your portfolio you withdraw annually. It's one of the most critical factors in determining how long your money will last.

Safe Withdrawal Rates

• 4% Rule: 95% success rate over 30 years
• 3% Rule: Very conservative, high success rate
• 5% Rule: More aggressive, higher failure risk
• Dynamic: Adjust based on market conditions

Factors Affecting Sustainability

• Market Returns: Higher returns = longer duration
• Inflation: Erodes purchasing power over time
• Sequence Risk: Early bad years hurt more
• Time Horizon: Longer retirement = lower safe rate

Source: Trinity Study - "Retirement Savings: Choosing a Withdrawal Rate" (1998)

Sequence of Returns Risk

Sequence of returns risk is the danger that poor investment returns early in retirement will significantly reduce your portfolio's longevity, even if average returns are good.

Example: The Impact of Timing

Scenario A: Good returns early, bad returns later

• Portfolio grows to $1.2M before market crash

• Crash affects larger balance, but recovery is possible

• Result: Portfolio survives

Scenario B: Bad returns early, good returns later

• Market crash early reduces portfolio to $600K

• Good returns later, but starting from lower base

• Result: Portfolio may not recover

Mitigation Strategies

Cash Reserves: Keep 2-3 years of expenses in cash
Dynamic Withdrawals: Reduce withdrawals during market downturns
Diversification: Spread risk across asset classes
Delayed Social Security: Delay claiming to reduce portfolio withdrawals

Source: Cooley, P. L., Hubbard, C. M., & Walz, D. T. (1998). "Retirement Savings: Choosing a Withdrawal Rate"

Account & Withdrawal Details

Starting Balance ($)Initial amount in your retirement account

010000000

Withdrawal Amount ($)Amount to withdraw each period

050000

Withdrawal Frequency

Expected Annual Return (%)Expected portfolio growth rate

0%15%

Compounding Frequency

Inflation Adjustment on Withdrawals

Balance Depletion Timeline

✅ Sustainable Withdrawals

Your portfolio is sustainable for 100+ years at the current withdrawal rate. Your returns exceed your withdrawals, allowing the portfolio to grow indefinitely.

Withdrawal Scenarios

How long will your money last at different withdrawal rates?

$36,000/year→100 years

$48,000/year→100 years

$60,000/year→100 years

$72,000/year→100 years

What If Analysis

Scenario Testing

Test Different Withdrawal Rates

Test Withdrawal Rate (%)Test different withdrawal rates

1%8%

See how your portfolio would perform with different withdrawal rates

Test Different Returns

Test Return Rate (%)Test different expected returns

2%12%

See how different return assumptions affect duration

Quick Scenarios

Withdrawals increase 2%/year (inflation)

Duration would likely decrease by 15-25% depending on returns

Return increases to 6%

Could extend duration significantly or make portfolio sustainable indefinitely

Reduce withdrawals by $2,000

Could extend duration by 30-50% or more

Research Sources

Withdrawal Rate Research:

• Bengen, W. P. (1994). "Determining Withdrawal Rates Using Historical Data"
• Trinity Study (1998). "Retirement Savings: Choosing a Withdrawal Rate"
• Vanguard Research: "The 4% Rule: A Safe Withdrawal Rate?" (2023)

Sequence of Returns Risk:

• Cooley, P. L., Hubbard, C. M., & Walz, D. T. (1998). "Retirement Savings: Choosing a Withdrawal Rate"
• Kitces, M. (2008). "The Impact of Sequence of Returns Risk on Retirement Withdrawals"
• Morningstar: "Sequence of Returns Risk in Retirement" (2024)

Inflation and Retirement Planning:

• Bureau of Labor Statistics: "Consumer Price Index Historical Data" (2024)
• Federal Reserve: "Inflation Expectations and Retirement Planning" (2024)
• AARP Research: "The Impact of Inflation on Retirement Security" (2024)

Portfolio Longevity Studies:

• Fidelity Research: "Portfolio Longevity and Withdrawal Strategies" (2024)
• Schwab Research: "Sustainable Withdrawal Rates in Different Market Conditions" (2024)
• BlackRock: "Retirement Income Planning and Portfolio Longevity" (2024)

About Annuity Duration

Understanding how long your retirement savings will last is crucial for planning. This calculator helps you determine if your withdrawal rate is sustainable or if you need to make adjustments.

The key factors are your withdrawal rate, expected returns, and whether you adjust withdrawals for inflation. A sustainable withdrawal rate allows your portfolio to last throughout your retirement years.

Key Financial Terms

Understand the essential concepts behind this calculator

Annuity Payment

Regular periodic payment from an annuity contract

Learn more →

View all financial terms in our glossary →

Frequently Asked Questions

Common questions about the Annuity Duration Calculator

The 4% rule is the most common guideline—withdrawing 4% of your portfolio in year one, then adjusting for inflation. This historically has a 95% success rate over 30 years. However, many advisors now recommend 3-3.5% for longer retirements (30+ years) or uncertain market conditions. Your specific safe rate depends on your age, portfolio mix, and other income sources.

📊 Historical Market Data Sources

S&P 500 Historical Returns:

• Average annual return (1926-2024): ~10% nominal, ~7% inflation-adjusted
• Standard deviation: ~20% (indicating significant year-to-year volatility)
→ Source: NYU Stern - Historical Returns on Stocks, Bonds and Bills

Dividend Yields:

• S&P 500 average dividend yield: 1.5-2.0% (as of 2024-2025)
• Historical dividend growth rate: ~5.9% annually (1960-2024)
→ Source: S&P Dow Jones Indices

Bond Returns:

• 10-Year Treasury bonds: ~5% average annual return (1926-2024)
• Corporate bonds (investment grade): ~6% average annual return
→ Source: NYU Stern - Corporate Finance Data

Inflation Rate:

• Long-term average: ~3% annually (1926-2024)
• Recent (2020-2024): 2-8% range with 2022 peak at 8%
→ Source: Bureau of Labor Statistics - Consumer Price Index

Important: Past performance does not guarantee future results. Market returns vary significantly year-to-year. These are long-term historical averages.

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⚠️ Important Disclaimer

This Annuity Duration Calculator provides estimates for educational and informational purposes only. Actual results may vary significantly based on individual circumstances, market conditions, regulatory changes, and other factors beyond the scope of this calculator.

The calculations and projections provided are based on assumptions and historical data that may not reflect future performance.Past performance does not guarantee future results.

This tool is not financial advice, tax advice, legal advice, or investment advice. For personalized guidance tailored to your specific situation, please consult with qualified professionals including:

Certified Financial Planner (CFP)
Certified Public Accountant (CPA) for tax matters
Licensed attorney for legal matters
Registered Investment Advisor (RIA) for investment decisions

Data Accuracy: All data sources, statistics, and rates were verified as accurate as of October 2025. Tax rates, market conditions, and other financial data change over time. Always verify current rates and consult official sources.

No Warranties: While we strive for accuracy, we make no warranties or guarantees regarding the accuracy, completeness, or reliability of any information provided. Use this tool at your own risk.