Retirement Savings Withdrawal Simulation: How Long It Lasts and the 4% Rule

How long assets last by balance and monthly withdrawal

This shows how long it takes for assets to run out, based on the balance when you start withdrawing and the monthly amount. "No investing" means keeping the money in deposits as you spend it, and "3% a year" means investing the remainder at 3% as you withdraw.

If the ratio of assets to withdrawals is the same, the lasting period is also the same (¥10 million at ¥50,000, ¥20 million at ¥100,000 and ¥30 million at ¥150,000 all give the same result). If your terms aren't in the table, look at a row with a similar ratio for an estimate.

How much longer it lasts if you keep investing

When withdrawing ¥100,000 a month from ¥20 million, the time your assets last changes with the return during withdrawal as follows.

Just continuing to invest at 3% makes it last about 6 and a half years longer. The larger the withdrawal, the smaller the effect: withdrawing ¥200,000 a month from ¥20 million stretches 8 years 4 months without investing only to 9 years 8 months at 3%. To make your money last longer, holding down the monthly withdrawal does more than raising the return.

How much you can spend each month to use it up in a set time

Working the other way, this decides the number of years to use the money up, such as "to age 90" or "to age 95", and works back to how much you can withdraw each month.

To use up ¥20 million in 30 years, you get about ¥56,000 a month in deposits, but about ¥84,000 if you can keep investing at 3%. This also fits the calculation in the 2019 report from Japan's Financial System Council: covering its "shortfall of about ¥55,000 a month" for 30 years takes just about ¥20 million without investing.

The limit that leaves principal untouched

If you withdraw only within your gains, your assets don't shrink (with a constant return, they never run out). For ¥20 million, the limits are as follows.

At 3%, your assets don't shrink up to ¥50,000 a month. That's why the first table shows "¥20 million, ¥50,000 a month, 3%" as "never runs out". But real returns move up and down each year, so withdrawing right at the limit means cutting into principal in down years.

What is the 4% rule?

The 4% rule is a rule of thumb that says if you withdraw 4% of your assets at retirement each year, they're unlikely to run out for 30 years. It became widely known through research using historical US stock and bond data (such as the 1998 Trinity University study). For ¥20 million, that's ¥800,000 a year, or about ¥67,000 a month.

Calculating this ¥67,000 a month at a constant return, it lasts about 25 years without investing, 34 years 9 months at 2% and 46 years 4 months at 3%, and at 4% it stays within gains so the assets don't shrink. But this assumes a constant return every year.

• The order of market moves changes the result: a big fall right after you start withdrawing means selling a lot at low prices, and your assets run out sooner even with the same average return.
• It's based on US data: investing in Japanese yen and differences in exchange rates and inflation aren't taken into account.
• Taxes aren't included: withdrawing from a taxable account incurs 20.315% tax on the gains in what you sell. Withdrawing from a NISA account (Japan's tax-exempt account) incurs no tax.
• Fixed amount vs fixed rate: if you recalculate 4% of your assets every year (a fixed rate), your assets theoretically never run out, but the amount you can spend falls in down years.

Check how long your own assets last

1. 1

   Enter assets and the withdrawal amount

   On the "Withdraw" tab of the Savings & Compound Interest Simulator, enter your assets at the start of withdrawals, the monthly withdrawal and the return while withdrawing.

2. 2

   Check how long it lasts and the limit

   A chart shows how long your assets last, the limit you can withdraw without shrinking them, and the balance year by year.

3. 3

   Work back from the years to use it up

   The monthly amount that uses the money up in exactly your chosen number of years appears both with and without investing. You can also check the 4% rule guide.

For how to build assets before withdrawing, see the contributions needed to reach ¥20 million for retirement. Accounts you can withdraw from tax-free are explained in NISA's tax-free limits. Your expected pension, the basis for deciding how much to withdraw, can be checked in the pension table by income and years enrolled.

FAQ

How long does ¥20 million last at ¥100,000 a month?

Without investing, it runs out in 16 years 8 months (200 months). Investing the rest at 3% extends it to about 23 years 2 months, and 4% to about 27 years 7 months. Starting at 65, it lasts until just past 81 without investing and just past 88 at 3%.

What is the 4% rule?

It's a rule of thumb that withdrawing 4% of your assets each year is unlikely to exhaust them for 30 years. For ¥20 million, that's ¥800,000 a year, or about ¥67,000 a month. It's based on research using historical US data and doesn't account for investing in yen, taxes or inflation, so use it as a guide.

How much can I spend each month without shrinking my assets?

The limit is assets × annual rate ÷ 12. If you can invest ¥20 million at 3%, your assets don't shrink up to ¥50,000 a month, and at 4% up to about ¥67,000, as long as the return stays constant. In reality markets fall in some years, so withdrawing a little below the limit is safer.

Is ¥30 million enough for a secure retirement?

It depends on your monthly withdrawal. At ¥100,000 a month, ¥30 million lasts 25 years without investing and 46 years 4 months if invested at 3%. At ¥200,000 a month, it lasts 12 years 6 months without investing and 15 years 9 months at 3%. The key is first to work out how much your pension falls short.