Level 0 ETF basics · Part 14/14

The pension gap: calculating capital needs and withdrawals

Two questions shape the numbers for retirement. Both can be worked through with calculators on Alysly; the results depend heavily on the assumed returns, which nobody knows in advance.

Bars of the capital needed for a 24,000-euro annual withdrawal at withdrawal rates of 3, 3.5, 4 and 5 percent
How much capital a €24,000 annual withdrawal requires: €800,000 at a 3 % withdrawal rate, about €685,700 at 3.5 %, €600,000 at 4 %, €480,000 at 5 %. The formula is annual spending ÷ withdrawal rate; whether a rate holds up for decades depends on returns and inflation that nobody knows in advance.

1. How much capital does a budget require?

The financial-independence (FIRE) calculator derives the capital target from annual spending and a withdrawal rate. The often-quoted 4 % rule comes from past US data and is a rule of thumb, not a guarantee.

2. How long does a portfolio last?

The withdrawal-plan calculator shows how many years a portfolio lasts at a given monthly withdrawal and return – or whether the income would cover the withdrawal indefinitely.

Inflation

A budget stated in today’s money rises with inflation. The inflation calculator shows what an amount is worth decades from now.

Information only, not investment or pension advice.