1. What is Retirement Drawdown?

Retirement drawdown refers to the process of withdrawing money from your retirement portfolio during retirement. The drawdown rate is the percentage of your portfolio you withdraw each year to cover living expenses.

2. How Does the Calculator Work?

The calculator uses the simple drawdown formula:

Where:

• \( Portfolio \) — Total value of retirement savings ($)
• \( Rate \) — Annual withdrawal rate (as decimal, e.g., 0.04 for 4%)

Explanation: This calculates the dollar amount you can withdraw annually from your portfolio based on your chosen withdrawal rate.

3. Importance of Drawdown Calculation

Details: Proper drawdown planning helps ensure your retirement savings last throughout your retirement years while maintaining your desired standard of living.

4. Using the Calculator

Tips: Enter your total portfolio value in dollars and your desired annual withdrawal rate as a decimal (e.g., 0.04 for 4%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a safe withdrawal rate?
A: The traditional "4% rule" suggests withdrawing 4% annually, adjusted for inflation, but the ideal rate depends on your age, portfolio composition, and market conditions.

Q2: How does drawdown affect portfolio longevity?
A: Higher withdrawal rates increase the risk of depleting your portfolio prematurely, especially in market downturns.

Q3: Should the withdrawal rate change over time?
A: Many experts recommend flexible withdrawal strategies that adjust based on portfolio performance and changing needs.

Q4: Are there tax implications for drawdowns?
A: Yes, withdrawals from tax-deferred accounts are typically taxed as ordinary income, while Roth accounts have different rules.

Q5: How should I adjust for inflation?
A: Many people increase their dollar withdrawals annually by the inflation rate to maintain purchasing power.