How long will $1 million last in retirement with inflation?

The setup

This is a math exercise, not a forecast. Start with $1,000,000. Take out $40,000 at the start of year one, which is 4% of the balance. Every following year, raise the withdrawal by the inflation rate so the spending keeps its buying power. The remaining balance earns a fixed nominal return. Count the years until the money runs out.

The 4% starting figure is the one commonly called the 4% rule. It is widely credited to research from the 1990s that tested 30-year retirements.* The calculation here does not depend on that rule. It just shows what happens at the stated assumptions. Real life has returns that rise and fall, taxes, fees and changing spending. All of those are left out, which is why the exercise is a yardstick.

How long it lasts

Reading the table: the middle row uses 2.50% a year, the compound rate at which the CPI-U rose from August 2006 to August 2026 (index 203.8 to 334.1). Returns are constant and nominal, meaning before inflation. A 6% nominal return in a 2.5% inflation world is a real return of about 3.4%.

Worked example: the same $40,000, 25 years on

With inflation at 2.5% a year, a retiree who needs $40,000 in year one needs about $72,349 in year 25 to buy the same things. At 3.35% inflation that rises to about $88,209, and at 4.5% about $115,041.

That is the squeeze. A fixed pension or a bond coupon that stays at $40,000 loses about 45% of its buying power over those 25 years at the 20-year average, and about 55% at the latest rate. Savings that keep growing can offset it, but only if returns stay ahead of inflation.

Assumptions: constant inflation and returns, annual withdrawals at the start of each year, no taxes or fees, no other income. Social Security, covered in another post in this series, is partly inflation-linked, which changes the real withdrawal need.*

Why the sequence of returns matters

The table assumes the same return every year. Real markets do not behave like that. A retiree who sees a large loss in the first few years of withdrawals has a much harder time than one who sees the same loss later, because withdrawals take money out of a shrunken balance. This sequence risk is widely discussed* and is one reason a constant-return table can look kinder than reality.

Spending is not constant either. Many people spend more early in retirement and less later,* with health costs rising at the end. Taxes change the net: withdrawals from a traditional account are generally taxed as income, which means a $40,000 withdrawal may leave less to spend. The scenario table ignores all of that.

What the table is good for is sensitivity. It shows how much a one-point change in inflation or in returns moves the answer, and that is large. Use it to see which assumption you are leaning on most, and test a more cautious version of it. A plan that survives a 4.5% inflation case has a lot of room.

What this means for your wallet

Three points fall out of the table. First, the same $1,000,000 can last under three decades or more than five, depending on the inflation and return you assume. Second, the sensitivity to inflation is large: moving from 2.5% to 4.5% takes 21 years off a 6% return case. Third, a lower starting withdrawal helps more than most people expect. Cutting the start to $35,000 at 3.35% inflation and a 6% return gives 50 years versus 39 years at $40,000.

If retirement is decades away, the figure that matters is not $1 million. It is what $1 million buys then. At 2.5% inflation, $1,000,000 in 25 years buys what about $539,391 buys today.

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