Enter the withdrawal amount and portfolio value into the calculator to determine the withdrawal rate. This calculator can also evaluate any of the variables given the others are known.
Withdrawal Rate Formula
The following formula is used to calculate the withdrawal rate.
WR = (WD / P) * 100
Variables:
- WR is the withdrawal rate (%)
- WD is the withdrawal amount ($)
- P is the portfolio value ($)
To calculate the withdrawal rate, divide the withdrawal amount by the portfolio value. Multiply the result by 100 to convert it into a percentage. This will give you the withdrawal rate.
What is a Withdrawal Rate?
A withdrawal rate refers to the percentage of savings or investment balance that a person takes out annually. It is commonly used in retirement planning to ensure that the retiree's savings last throughout their retirement years. The rate is typically calculated based on various factors such as life expectancy, expected rate of return on investments, and desired lifestyle. A sustainable withdrawal rate is designed to minimize the risk of depleting one's savings prematurely.
How to Calculate Withdrawal Rate?
The following steps outline how to calculate the Withdrawal Rate.
- First, determine the withdrawal amount ($).
- Next, determine the portfolio value ($).
- Next, use the formula WR = (WD / P) * 100 to calculate the withdrawal rate.
- Finally, calculate the Withdrawal Rate.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem:
Use the following variables as an example problem to test your knowledge.
withdrawal amount ($) = 5000
portfolio value ($) = 100000
