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Savings Withdrawal Help
You will find the savings withdrawal calculator to be very flexible. While it is most frequently used to calculate how long an investment will last assuming some periodic, regular withdrawal amount, it will also solve for the " Starting Amount", "Annual Interest Rate" or "Regular Withdrawal Amount" required if you want to dictate the duration of the payout. That is, if the withdrawals must last for say 25 years, it will calculate one of these other three values.
Enter any three values and enter a "0" (zero) for the one unknown value.
A note or two about "Compounding Frequency". Selecting he "Exact/Simple" option sets the calculator so it will not compound the interest. Also, the exact number of days between withdrawal dates is used to calculate the interest for the period. The "Daily" option uses the exact number of days between dates, but daily compounding is assumed. (The interest earned each day is added to the principal amount each day.) The "Exact/Simple" compounding option is the most conservative setting. That is, using it will result in the lowest future value. Daily compounding will result in nearly the greatest future value (except for "Continuous Compounding".
The other compounding frequencies are based on periods of time other than days. Each period is assumed to be of equal length for the purposes of interest calculations. That is, assuming a balance of $10,000, the interest earned for January will be the same interest earned for February given the same interest rate.
Pat Sturgis says:
Why do I repeatedly get “NaN” inserted in the Number of Withdrawals field, where I have inserted a “0,” with the other 3 fields filled with values? The calculator worked once, with a different interest rate, but hasn’t worked since. I have tried changing browsers, re-booting.
Karl says:
"NaN" means "not a number". A user should never see that. It means the calculator is not show an appropriate message.
Without knowing your specific inputs, I can’t tell you what the exact reason is you are seeing NaN. However, I can make a guess.
My guess is, you increased the interest rate and now the amount being withdrawn is less then the amount earned in interest for the period. Which means the number of periods is infinite. You can test my guess by reducing the interest rate a bit (say by 0.5 at a time).
If you give me your exact inputs, I’m also happy to let you know the reason.
BobA says:
Where is the money “stored” to earn the interest? Stocks, cash savings, combo. I am completely ignorant on this subject.
Karl says:
If your question is, where should you invest the money, I’m afraid I’m not qualified to provide investment advise. I am happy to answer any questions you have about what calculator to use, or how to use a calculator.
Guy says:
this is really a great tool Karl, thank you
Karl says:
Thank you, Guy. I’m happy to hear you found it useful.
Greg Taylor says:
This is exacty what I was looking for as I approach retirement! THANKS!
Karl says:
You’re welcome. Happy retirement!
Aldo says:
Is this based on what we use to call a “sinking fund” equation back in engineering school?
Gary says:
How to choose compounding frequency on mutual fund investments?
Karl says:
I’m sorry, but I don’t understand what you mean. The compounding frequency is the compounding frequency. It does not matter if it’s for a loan, a mutual fund, or whatever. If you are asking "what" compounding frequency you should pick for a mutual fund, I would suggest annually, as that is most conservative.
Gary says:
Forgive my naivete’; I was simply asking what method of compounding to choose and have entered into the box on your calculator, when the monies are currently held in a mutual fund account.
Karl says:
It’s a good question. I just wasn’t sure what your question was.
The compounding option generally is made available for savings and similar accounts that specify a compounding frequency.
But the calculator can be used for mutual funds, and what you set it to depends on how you set the rate. Say, for example, your mutual fund states they average a 7% annual return. Then I would set compounding to annually.
However, if again, for example, you see that your fund returned 2% for the last quarter then you need to do a little arithmetic. Since the calculator asks for an annual rate, you should enter 8%. And since the return was for a quarter, I would set the compounding to quarterly.
But the bottom line is when projecting how long income from a mutual fund might last, it can only be an estimate since we do not know how the fund will perform in the future. And the “error” from picking the “wrong” compounding frequency may pale compared to the change in the fund’s future performance. So compounding for a mutual fund is definitely not something one needs to stress out over.
Ev says:
Thank you for this calculator. It’s exactly what I was looking for. As spouses who are already retired, it’s been impossible to find calculators that made sense. Other calculators I’ve found have to do with pre-retirement. Do you have one that adds in social security income?
Karl says:
I’m not exactly sure what you want to calculate. This retirement calculator is for retirement planning. It has a saving/investing cash flow and a withdrawal cash flow. The withdrawal cash flow allows the user to include social security income.
Lee Holsenbeck says:
your annual interest rate is 5.5%, so if it is a mutual fund; you are expecting a 5.5% return annually or is it a 5.5% return on some sort of money market, CDs, or annuities ?
Karl says:
That rate is simply a default value. The calculators on this site are designed so a user can quickly see what a schedule will look like without having to stop and enter values.
Enter whatever rate fits your needs.
Ed says:
Could you add inflation support?
1000/month today won’t look like much in 15 or 20 years.
Karl says:
Please try this investment calculator. It has a withdrawal feature and the amount can be adjusted by an inflation factor. Please let me know how you make out.
Ed says:
Based on another calculator titled ‘How Long Will My Money Last’ I would expect 300K, at 5% gain and 3% inflation for 15 years (180 pmts) to provide $1934 at payment #1 and $3034 at payment #180.
In the first year that calculator reports the monthly range for the 1st twelve withdrawal payments begin at $1934 and end at $1988, approx. a $5 increase each month.
The https://financial-calculators.com/investment-calculator does not replicate, even closely, those results. Your Withdrawal Calculator comes the closest to the interface I desire, albeit it doesn’t support inflation or report incrementing monthly withdrawal figures.
Payment or donation would be forth coming if that happened, and I think the app would rise to the top in the world of calculators.
Thanks
Ed
Karl says:
Hi Ed, first, let me say that these calculations are hypothetical since there are several assumptions being made, as I’m sure you understand. Also, two calculators can model the withdrawal differently, and neither will be wrong. That said, I’m wondering what you mean by "even closely?" I see the two calculations as being close.
The investment calculator adjusts the withdrawal for inflation once a year, not each month. If I take $1,934 and increase it by 3%, I get $1,992, which should be the withdrawal amount starting with the 13th period, and that’s exactly what the investment calculator gives me. What did you get?
To confirm this, make sure your options are set this way:
Annual Inflation Rate?: 3.000% Adjust Cash Flow For Inflation?: Yes Federal Marginal Tax Rate?: 0.000% State Marginal Tax Rate?: 0.000% Are State Taxes Deductible?: No Whether or not state taxes are deductible on Federal tax return. Taxes Calculated on Withdrawal?: No If "No", taxes are calculated on investment gain. Management Fee?: 0The calculator has different values when it’s first loaded. Make sure you set the adjustment for inflation to "Yes," and remove the tax rate.
Nicolas says:
hello! So I am not sure on how to use it. Here is the situation to solve.
for example, I have 10.000 of savings. Let’s say anual interest is 4%. I would like to know the final amount of money I would have after 60 months, with the same anual interest but making a withdrawal of 20 every month for those 60 months. Is that possible with this calculator? Let me know please what to enter and in which cell. Please
Best regards
Nicolas
Karl says:
Since you have no unknown values and you want to know the balance at the end of 60 months, just input what you told me, and click on the "Withdrawal Schedule." Enter the 10,000 in "Savings on Hand."
Nicolas says:
Hello! I find this calculator very helpful but it is kind of not working, I keep getting the NaN on the interest and net change column.
Karl says:
Oh, that’s not good. NaN stands for not a number. I just started to see that this past weekend and I think I know what the reason is. I should have it fixed in a week (+/-) if I’m right.
Just in case it’s something else, can you tell me your inputs?
What I think is happening is there’s a problem when the last withdrawal is in January (that was the issue with the Investment Calculator). If that’s the case, you can try to shift your calculation by one month in either direction. The numbers will be accurate, just off by 1 month.
Karl says:
I’m able to duplicate the problem, so I don’t need an example. For me, it works just fine if I make the dates exactly a month apart. But I will get a fix out in the next few days to a week, I hope.
Nicolás says:
Thanks!! Yeah well, in my case I was setting it as todays date and first withdrawal April 1st. Interest at 10% monthly withdrawals and compounding during 18 months. $10,000 savings in hand and 300 withdrawals. I hope you can fix it :).
Oh and it didn’t calculate the amount of months asked to. It just did 2.
Best regards
Karl says:
Nicolas, I released a fix this morning, so all should be good now.
If you do not see the change right away, you may have to perform a hard refresh of the page:
Depending on your operating system all you need to do is the following key combination:
Above, from Refresh Your Cache.
If you don’t mind, please confirm. If there are still problems, I will certainly work on them until they are resolved.
Nicolás says:
Thanks you very much for your help. I can now confirm it is working like a charm!!
Best regards
Nicolás.
Karl says:
Great! Thanks for letting me know.