Steps to Calculate Your Withdrawal Percentage From Retirement

Steps to Calculate Your Withdrawal Percentage From Retirement

To calculate your retirement withdrawal percentage, divide your annual withdrawal amount by your total retirement savings for the year to find the percentage. For a sustainable withdrawal rate, use a calculator or the 4% rule: subtract your annual expenses from your total retirement savings and multiply by 100. Alternatively, if you are withdrawing from an IRA, the IRS requires a calculation based on the account's prior December 31 balance and a life expectancy factor. 

Steps to Calculate Your Withdrawal Percentage

Determine Your Annual Withdrawal Amount:

Calculate your total annual expenses in retirement. 

Determine Your Total Retirement Savings:

Find the total balance of your retirement accounts. 

Calculate the Percentage:

Divide your annual withdrawal amount by your total retirement savings. 

Formula: (Annual Withdrawal Amount / Total Retirement Savings) x 100 

Example: 

You have $500,000 in retirement accounts.

You plan to withdraw $20,000 in the first year.

Your withdrawal percentage is ($20,000 / $500,000) x 100 = 4%.

Using the 4% Rule

The 4% rule is a benchmark for a sustainable withdrawal rate. 

For a 30-year retirement, a 4% withdrawal rate is often cited as a target, Charles Schwab though it can be adjusted based on individual factors. 

In subsequent years, you would adjust your dollar amount for inflation. 

Required Minimum Distributions (RMDs) 

If you are 73 or older, the IRS requires you to take Required Minimum Distributions (RMDs).

The calculation involves dividing the prior year's December 31 account balance by a life expectancy factor found in the IRS tables.

Tools and Advice

Use a retirement withdrawal calculator from a financial institution to help you plan. 

Consult with a financial advisor to get personalized advice for your specific situation. 


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