Does the 4% rule actually work?

In simulations, withdrawing 4% of a $1M portfolio ($40,000/year) over 30 years succeeds roughly 90% of the time with a balanced portfolio, but outcomes range widely. It is a strong guideline, not a guarantee.

What is a Monte Carlo retirement simulation?

It runs your plan across many random but realistic market paths (for example 1,000) and reports how often your money lasts, revealing the range of outcomes that a single average return hides.

How can I improve my chance of not running out of money?

Withdraw a bit less, stay flexible and cut spending in bad years, work a little longer, or hold a more resilient allocation. Testing each in the calculator shows how much the success rate moves.

Retirement · Honest math, no agenda

Will your money last? What $1M really buys

You have heard the 4% rule: retire on a million, withdraw $40,000 a year, and you are fine. But "fine" hides a lot. Run that exact retirement through 1,000 possible market histories and the answer is both reassuring and a little scary.

Why a single average return lies

Most calculators use one expected return and draw one smooth line. Real markets zigzag, and the order of good and bad years matters enormously, a crash early in retirement, while you are withdrawing, can sink a portfolio that the same returns in a different order would leave fine. That is sequence-of-returns risk, and a single average completely hides it.

A worked example

A $1,000,000 portfolio at 65, withdrawing $40,000 a year (the 4% rule), over 30 years, with a 5% expected return and 11% volatility, run across 1,000 simulated markets:

Chance the money lasts: about 91%
Median ending balance: about $1.2 million (more than you started)
Rough bad case (bottom 10%): about $42,000

Nine times in ten you are fine, and the median retiree dies richer than they started. But in the worst 10% of market histories, the same plan nearly runs dry. The difference is entirely which markets you happen to retire into.

Stress-test your plan →Free retirement Monte Carlo calculator. No sign-up. See how often your money lasts and test the levers.

What to do with a 91%

Whether a one-in-ten shortfall risk is acceptable is a personal call, not a math one. If it worries you, the levers are real and testable: withdraw a bit less and the success rate climbs fast; stay flexible and cut spending in bad years; or work one or two more years. And notice the hopeful truth in the median, most retirees die with more than they started, meaning many could safely spend more. Under-spending out of fear is its own quiet cost.

The honest caveat

The simulation is random, so the exact percentage wiggles a point or two each run, that is the nature of simulation, not a glitch. It does not know future returns, taxes, or Social Security, it is a stress test of your withdrawal plan, not a crystal ball. Use it to compare choices, not to predict.

Figures from TheSharpDollar's retirement Monte Carlo calculator; because it is simulated, exact numbers vary slightly each run. Your result depends on your portfolio, withdrawals, and assumptions.