From a lump sum to a paycheck
A portfolio does not come with a salary attached, so people use a withdrawal rate to turn it into income: take a fixed percentage in the first year, then raise that dollar amount with inflation each year after. The best known version is the 4% rule, which came from US research in the 1990s showing that a 4% starting withdrawal from a stock and bond mix survived every 30-year period in the historical record.
Yearly income = portfolio × withdrawal rate
On $1 million, 4% is $40,000 a year, or about $3,333 a month before tax. At 3% it is $30,000, and at 5% it is $50,000.
Which rate is safe?
The right rate depends on how long the money must last. For a 30-year retirement, 4% has a long track record. For an early retirement lasting 40 to 50 years, many planners suggest 3.25% to 3.5%. If you are willing to cut spending in bad market years, a slightly higher starting rate becomes more reasonable.
For a year-by-year view, including how long the money lasts at a fixed spending level, use the how long will my money last calculator.
Common questions
Can I live off the interest of $1 million?
At current savings and bond yields of roughly 4%, $1 million could pay about $40,000 a year in interest, but inflation slowly erodes that if you spend it all. A diversified portfolio with the 4% rule is the more common approach.
How long will $1 million last at $50,000 a year?
With a 5% real return it lasts indefinitely; with 3% it lasts roughly 30 years. It depends heavily on returns.
Is the 4% rule still valid?
It remains a widely used starting point. Some research suggests slightly lower rates when valuations are high, so many people plan with 3.5% to 4%.
This calculator gives estimates for planning. Real returns, rates and prices change, so treat the result as a guide rather than a promise. Read how we build and check our calculators.