{"format":"alysly-page/1","url":"https://alysly.com/research/living-off-returns/","json":"https://alysly.com/json/research/living-off-returns/index.json","lang":"en-US","title":"Living Off Investment Returns: The Capital You Need","description":"€3,000 a month needs €1.2m at a 3% real return and €3.6m at 1%. What our data shows about real returns, sequence risk and the 4% rule.","published":"2026-03-17T00:00:00Z","modified":"2026-11-12T09:52:13+01:00","alternates":[{"lang":"de-DE","url":"https://alysly.com/de/research/von-der-rendite-leben/","json":"https://alysly.com/json/de/research/von-der-rendite-leben/index.json"}],"about":"Machine-readable version of the page at url. It contains the text, tables and key figures published there, but not the interactive charts and tools.","breadcrumb":[{"name":"Research","url":"https://alysly.com/research/"},{"name":"Living Off Your Returns: What It Really Takes","url":"https://alysly.com/research/living-off-returns/"}],"content":[{"type":"heading","level":1,"text":"Living Off Your Returns: What It Really Takes"},{"type":"paragraph","text":"By Alexander Bock, founder and data analyst","links":[{"text":"Alexander Bock","href":"https://alysly.com/about/"}]},{"type":"image","src":"https://alysly.com/research-img/living-off-returns-photo.webp","alt":"Living Off Your Returns: What It Really Takes"},{"type":"paragraph","text":"Photo: Tima Miroshnichenko / Pexels","links":[{"text":"Tima Miroshnichenko","href":"https://www.pexels.com/@tima-miroshnichenko"},{"text":"Pexels","href":"https://www.pexels.com/photo/hands-of-a-person-counting-cash-money-6693632/"}]},{"type":"paragraph","text":"Living off investment income is often framed as a question of how much wealth you need. In practice, it comes down to one number that you cannot know in advance: the real return after inflation over the decades the portfolio has to last. Everything else is arithmetic, and that arithmetic is unforgiving."},{"type":"paragraph","text":"Key finding as of Sep 4, 2026: €1.2m (needed for €3,000 a month indefinitely at a 3% real return)."},{"type":"list","ordered":false,"items":["€1.2m needed for €3,000 a month indefinitely at a 3% real return","€3.6m needed for the same €3,000 a month if the real return is only 1%","0.9% real price growth of US homes over 39 years","0% capital left when the same returns arrive in the worst possible order"]},{"type":"heading","level":2,"id":"the-only-number-that-matters","text":"The Only Number That Matters"},{"type":"paragraph","text":"In its basic form, the capital needed to live off investments is the annual withdrawal divided by the expected real return. The difficult part is deciding what that return should be."},{"type":"paragraph","text":"Loading figure …"},{"type":"paragraph","text":"Capital needed for €3,000 a month at different assumed real returns."},{"type":"paragraph","text":"For €3,000 a month, or €36,000 a year, you need €1.2 million at a 3% real return to keep up that withdrawal indefinitely. At 4%, the requirement falls to €900,000. At 2%, it rises to €1.8 million, and at 1% it reaches €3.6 million."},{"type":"paragraph","text":"Allowing the portfolio to run down changes the calculation substantially. Over 30 years, the same €3,000 monthly withdrawal requires €705,600 at 3% and €929,100 at 1%. Over 40 years, the figures are €832,100 and €1.18 million."},{"type":"paragraph","text":"That gap is the central problem. A difference of one percentage point in the assumed real return can change the required capital by more than any realistic change in savings rate. So the obvious question is what real return is reasonable to assume."},{"type":"heading","level":2,"id":"what-our-data-says-about-real-returns","text":"What Our Data Says About Real Returns"},{"type":"paragraph","text":"Nominal returns are easy to quote but not very useful for this question. Withdrawals have to keep up with rising prices, so what matters is the return left after inflation. That number can be much lower than the headline return."},{"type":"table","caption":"Living Off Your Returns: What It Really Takes","columns":["Asset","Window","Nominal per year","Real per year"],"rows":[[{"text":"S&P 500 (price, no dividends)","links":[{"text":"S&P 500","href":"https://alysly.com/markets/indices/sp500/"}]},"9.4 years","13.4%","9.7%"],["Gold","3.7 years","27.3%","23.2%"],["US home prices","39.5 years","4.3%","0.9%"],["German overnight deposits","9.3 years","0.2%","−2.8%"]]},{"type":"paragraph","text":"The equity and gold figures are impressive, but both come from relatively short periods. The equity window covers nine years that included one of the strongest bull markets on record. The gold figure covers less than four years of a strong rise in gold prices. Assuming a 9.7% real return for a 40-year retirement because the previous nine years delivered it would be very bold.","links":[{"text":"gold prices","href":"https://alysly.com/markets/metals/gold/"}]},{"type":"paragraph","text":"The property figure is more useful for this question. It covers 39 years, from 1987 to 2026, and is the longest continuous series in our data. Over that period, US home prices rose 4.3% a year in nominal terms and just 0.9% a year after inflation. Rental income is not included. A long time horizon can paint a very different picture of a return that is often considered reliable."},{"type":"paragraph","text":"Cash looks worse still. German overnight deposits gained 1.81% in total over 112 months, about 0.19% a year. German consumer prices rose 3.13% a year over the same period. The real return was therefore −2.8% a year. Purchasing power fell by roughly a quarter without a single bad day in the stock market."},{"type":"heading","level":2,"id":"the-order-of-returns-matters-as-much-as-the-return-itself","text":"The Order of Returns Matters as Much as the Return Itself"},{"type":"paragraph","text":"This part of the research can be calculated exactly, because it requires no additional assumptions. Take our 114 monthly returns, withdraw 4% a year adjusted for inflation, and put the same returns in different orders."},{"type":"paragraph","text":"Loading figure …"},{"type":"paragraph","text":"The same 114 monthly returns in four different orders, with a 4% withdrawal."},{"type":"paragraph","text":"In the order the returns actually occurred, the portfolio ends at 240% of its starting value. In reverse order, it ends at 250%. With the best months first, it reaches 304%. With the worst months first, the portfolio falls to zero before the stronger months arrive."},{"type":"paragraph","text":"Nothing changes except the sequence. The returns, withdrawal rate and time period are identical, yet the outcomes range from complete depletion to more than tripling the starting capital. Randomly shuffled sequences end between 228% and 259% in nine out of ten cases. That shows how unusual the worst sequence is. It does not make the risk irrelevant for the person who lives through it."},{"type":"paragraph","text":"This is why an average return is a poor input for a withdrawal plan. An average summarizes an entire period, while a retiree experiences one specific sequence of returns. The early years carry the most weight."},{"type":"heading","level":2,"id":"where-this-research-has-to-stop","text":"Where This Research Has to Stop"},{"type":"paragraph","text":"The obvious next step would be a failure rate: how often does a portfolio run out of money at a 4% withdrawal rate? We can calculate that from our own data. The result also shows why the number should not be treated as a reliable estimate of future risk."},{"type":"paragraph","text":"Loading figure …"},{"type":"paragraph","text":"Share of portfolios exhausted within 30 years at different withdrawal rates."},{"type":"paragraph","text":"Drawing twelve-month blocks from our 114 monthly returns produces a failure rate of 0.3% at 4%, 1.1% at 5% and 4.9% at 6%. At 4%, the median portfolio still ends the 30-year period at roughly 25 times its starting value."},{"type":"paragraph","text":"Those figures are mathematically correct but of little use for planning. The reason is clear from the section above. The sample contains nine years of one of the strongest equity markets in history, with a 9.7% real annual return. A bootstrap can only reshuffle the conditions contained in the original data. Our sample does not include a lost decade, so the model cannot produce one."},{"type":"paragraph","text":"The useful conclusion is therefore a rule for reading withdrawal studies, not a specific failure rate. The result depends first on the sample period and only then on the withdrawal rate. In our sample, even a 5% withdrawal rarely failed. A sample covering 1966 to 1982, or Japan after 1990, would look very different, and neither period is in our data."},{"type":"heading","level":2,"id":"what-the-data-does-support","text":"What the Data Does Support"},{"type":"paragraph","text":"Three points remain after all of these caveats."},{"type":"paragraph","text":"First, the capital requirement is simple arithmetic, but it is more sensitive than it looks. It is €1.2 million for €3,000 a month at a 3% real return, and €3.6 million at 1%. Whatever assumption you use, its effect is larger than any realistic difference in savings rate."},{"type":"paragraph","text":"Second, long periods tend to produce much lower real returns than short, exceptional ones. The only multi-decade series in our data delivered 0.9% real over 39 years, compared with 9.7% real for equities over nine years. A plan based on the nine-year figure needs only about a third of the capital of one based on the 39-year figure. That holds over a 30- to 40-year withdrawal."},{"type":"paragraph","text":"Third, the order of returns matters as much as their size. The same returns, simply reordered, produced outcomes ranging from a more than tripled portfolio to complete depletion. Choosing different investments does not remove this risk. A cash buffer that avoids selling after a major decline can reduce it. Either way, a sustainable withdrawal plan can need more capital than the simple division suggests."},{"type":"heading","level":2,"id":"method","text":"Data and Method"},{"type":"facts","items":[{"label":"Data basis","value":"es.f · Apr 3, 2017 to Sep 4, 2026 · 114 months"}]},{"type":"list","ordered":false,"items":["The equity figures come from the front-month S&P 500 futures chain from April 3, 2017, to September 4, 2026,. It is a price series without dividends, in US dollars. Dollar returns are adjusted using the US CPI series in our own macro data (3.38% a year). The German deposit rate is adjusted using the German HICP series (3.13% a year). Mixing the two would compare a return in one currency with inflation in another.","Inflation is calculated as the average year-over-year rate over the relevant period. Chaining the annual rates instead produces 3.45% inflation and a real equity return of 9.7% rather than 9.8%. Both values are shown to make clear that this distinction does not change any conclusion.","The capital tables use exact arithmetic rather than simulation. An indefinite withdrawal requires the annual withdrawal divided by the real return; a 30- or 40-year withdrawal uses the corresponding annuity factor.","The failure rates come from a bootstrap of our own 114 monthly returns. They are drawn in twelve-month blocks so that strong and weak years stay together, with withdrawals rising in line with measured inflation. The results must be read with the caveat in this research: the sample contains no lost decade.","The sequence test is not a simulation. It uses the same 114 monthly returns in different orders, which makes it the cleanest test in this research.","Taxes, product costs and currency effects are excluded. A euro investor holding a dollar-denominated index also carries currency risk, which is not modeled here."]},{"type":"paragraph","text":"Every figure comes from our own price database and is produced by a script in the repository. Running it again with the same cutoff date returns the same numbers. Not investment advice."},{"type":"heading","level":2,"text":"Further Reading"},{"type":"list","ordered":false,"items":[{"text":"Why Most Traders Lose Money the other side of the same arithmetic","links":[{"text":"Why Most Traders Lose Money","href":"https://alysly.com/research/why-most-traders-lose-money/"}]}]},{"type":"paragraph","text":"Embed this chart"},{"type":"paragraph","text":"The chart may be embedded with a visible source credit and a link to this page. 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Built on data we collect and keep current.","email":"mail@alysly.com","contactPoint":{"@type":"ContactPoint","contactType":"customer support","email":"mail@alysly.com","availableLanguage":["de","en"]},"address":{"@type":"PostalAddress","addressLocality":"Haltern am See","postalCode":"45721","addressCountry":"DE"},"founder":{"@id":"https://alysly.com/#founder"},"sameAs":["https://www.linkedin.com/company/alyslycom/","https://www.youtube.com/@alyslycom","https://x.com/alyslycom"],"publishingPrinciples":"https://alysly.com/methodology/","correctionsPolicy":"https://alysly.com/corrections/"},{"@type":"Person","@id":"https://alysly.com/#founder","name":"Alexander Bock","jobTitle":"Founder and data analyst","url":"https://alysly.com/about/","sameAs":["https://www.linkedin.com/in/abxk/"]},{"@type":"WebSite","@id":"https://alysly.com/#site","url":"https://alysly.com/","name":"Alysly","inLanguage":["de-DE","en-US"],"publisher":{"@id":"https://alysly.com/#org"}},{"@type":"WebPage","@id":"https://alysly.com/research/living-off-returns/#webpage","url":"https://alysly.com/research/living-off-returns/","name":"Living Off Your Returns: What It Really Takes – Alysly","description":"€3,000 a month needs €1.2m at a 3% real return and €3.6m at 1%. 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