How Long Your 401(k) Will Last in Retirement

The math depends on how much you have, how much you spend, and how long you live

How long your 401(k) will last is not a fixed number—it depends on three things you can measure and one you cannot. You can know your current balance, your annual spending in retirement, and your investment returns (based on history, though not may provide). You cannot know how long you will live. The calculation itself is straightforward: divide your balance by the number of years you expect to spend in retirement, then adjust for investment growth and inflation. The hard part is making honest assumptions about each piece.

A simple example: if you have $500,000 saved and plan to spend $25,000 per year from it, your money would last 20 years if it earned nothing. But 401(k) money typically stays invested, so if your balance grows at 5 percent per year while you withdraw $25,000 annually, it will last longer than 20 years. If your balance shrinks because you withdraw more than it earns, it will last fewer years. The point at which your 401(k) reaches zero is when you run out of money—and that date changes every time the market moves or you adjust your spending.

Key Takeaways

• Your 401(k) longevity depends on your starting balance, annual withdrawal amount, investment returns, and how many years you spend in retirement.
• The 4 percent rule is a common starting point: withdraw 4 percent of your balance in year one, then adjust that dollar amount for inflation each year.
• If you withdraw more than your investments earn, your balance will eventually reach zero; if you withdraw less, your money may last your entire life.
• Life expectancy tables show averages, but you may live longer or shorter than the average for your age and sex, so plan for a range of outcomes.
• Required minimum distributions (RMDs) force you to withdraw a set amount each year starting at age 73, which may deplete your balance faster than you planned.

The 4 percent withdrawal rule and how it works

The 4 percent rule is a widely used starting point for retirement withdrawals. In your first year of retirement, you withdraw 4 percent of your 401(k) balance. In every year after that, you withdraw the same dollar amount you withdrew the year before, adjusted upward for inflation. The rule assumes your money is invested in a mix of stocks and bonds, earning an average return over time, and that you will live roughly 30 years in retirement.

Here is a concrete example: you retire with $600,000 in your 401(k). Four percent of $600,000 is $24,000. You withdraw $24,000 in year one. In year two, if inflation was 3 percent, you withdraw $24,720. In year three, you withdraw $25,461. You continue this pattern for 30 years. Historical data suggests that this approach would have worked in most past decades, though not all. The rule does not may provide your money will last; it is a framework based on historical market performance.

The 4 percent rule assumes you have a diversified portfolio—typically 60 percent stocks and 40 percent bonds, or something similar. If your 401(k) is invested entirely in money market funds or bonds, your returns will be lower and your money will not last as long. If your portfolio is 100 percent stocks, your returns may be higher but your balance will swing more dramatically with market swings, which can be risky late in retirement.

How investment returns affect how long your money lasts

The growth rate of your 401(k) investments is the single biggest variable after your withdrawal amount. A 1 percent difference in annual returns can add or subtract years from how long your money lasts. If your balance earns 3 percent per year and you withdraw 4 percent, you are drawing down your principal. If your balance earns 6 percent per year and you withdraw 4 percent, you are living off the growth and your principal may actually grow.

Past stock market returns have averaged around 10 percent per year over very long periods, though with significant year-to-year variation. Bond returns have averaged around 5 to 6 percent. A balanced portfolio of 60 percent stocks and 40 percent bonds might average 7 to 8 percent over time, though again, this is historical and not may provide. If you assume a 7 percent return and your actual returns are 5 percent, your money will run out sooner than you planned.

This is why many people use a conservative estimate—5 or 6 percent instead of 7 or 8—when calculating how long their money will last. It is also why your asset allocation matters. If you shift to a more conservative portfolio as you age (more bonds, fewer stocks), your expected returns will drop, and your money will not last as long unless you also reduce your spending.

Required minimum distributions and forced withdrawals

Starting at age 73, the IRS requires you to withdraw a minimum amount from your 401(k) each year, called a required minimum distribution (RMD). The amount is calculated by dividing your 401(k) balance on December 31 of the prior year by a life expectancy factor published by the IRS. The older you are, the larger the percentage you must withdraw.

At age 73, the life expectancy factor is roughly 26.5, meaning you must withdraw about 3.8 percent of your balance. At age 80, the factor is roughly 18.7, meaning you must withdraw about 5.3 percent. At age 90, the factor is roughly 11.4, meaning you must withdraw about 8.8 percent. These forced withdrawals may be more than you want to spend, which can deplete your balance faster. They may also push you into a higher tax bracket or trigger taxes on Social Security benefits.

If you do not need the money, you cannot simply leave it in the 401(k). You must withdraw it, pay income tax on it, and either spend it or reinvest it in a taxable account. This is one reason some people do a Roth conversion before age 73—to move money into a Roth IRA, which has no RMDs during your lifetime. However, conversions are taxable in the year you do them, so this strategy only makes sense if you have other money to pay the tax.

Life expectancy and planning for different scenarios

Life expectancy tables show the average lifespan for people your age and sex, but you may live longer or shorter than average. The Social Security Administration publishes life expectancy data: a 65-year-old man has a life expectancy of roughly 19 more years (to age 84), and a 65-year-old woman has a life expectancy of roughly 21 more years (to age 86). However, these are averages. If you are in good health with no major illnesses, you may live into your 90s. If you have significant health issues, you may not.

A practical approach is to plan for multiple scenarios. Calculate how long your money will last if you live to age 85, age 90, and age 95. If your money runs out at age 90 but you might live to 95, you need a backup plan—either reduce your spending, work part-time longer, or plan to rely more heavily on Social Security. If your money lasts to age 100 under conservative assumptions, you have more flexibility.

Some people use online calculators or work with a financial advisor to run these scenarios. The calculator asks for your current balance, your planned annual spending, your expected investment return, and your life expectancy, then shows you the probability that your money will last. These tools are useful for stress-testing your plan, but remember that they are based on assumptions, not guarantees.

Adjusting your spending if your money is running short

If you calculate that your 401(k) will run out before you expect to die, you have several options. The simplest is to reduce your annual spending. If your money will last 25 years at $30,000 per year but you might live 35 years, you could reduce spending to $21,000 per year to stretch it further. This is not ideal, but it is concrete and within your control.

Another option is to delay taking money from your 401(k). If you retire at 62 but do not touch your 401(k) until 67, your balance will have five more years to grow, and you will have fewer years left to withdraw from it. This works especially well if you have other income sources (a pension, part-time work, or Social Security) to live on in the early years.

A third option is to work part-time in early retirement. Even modest income—$10,000 to $15,000 per year—can cover a significant portion of your spending and reduce the amount you need to withdraw from your 401(k). This also gives your balance more time to grow before you start drawing it down heavily.

How inflation erodes your purchasing power over time

Inflation is the reason a dollar buys less each year. If inflation averages 3 percent per year, something that costs $100 today will cost $134 in 10 years and $180 in 20 years. This matters for your 401(k) because your withdrawals need to increase over time just to maintain the same standard of living. The 4 percent rule accounts for this by adjusting your withdrawal amount upward each year.

However, if inflation is higher than you assumed, your money will not last as long. If you planned for 3 percent inflation but inflation runs at 5 percent, your purchasing power shrinks faster than expected. This is another reason to be conservative in your assumptions: assume higher inflation than recent history suggests, and assume lower investment returns. If inflation and returns turn out to be better than you assumed, you will have more money than expected.

Frequently Asked Questions

What if I have multiple retirement accounts—a 401(k), an IRA, and a Roth IRA?

Calculate your total balance across all accounts and treat them as one pool for longevity purposes. However, note that RMDs apply to your 401(k) and traditional IRA combined, but not to Roth IRAs during your lifetime. You can withdraw from your Roth first to delay RMDs, or withdraw from your taxable accounts first to minimize taxes.

Does Social Security change how long my 401(k) needs to last?

Yes. If you expect $2,000 per month in Social Security starting at age 67, you only need your 401(k) to cover the gap between that amount and your total spending. If you spend $4,000 per month and Social Security covers $2,000, your 401(k) only needs to provide $2,000 per month, which extends how long it will last.

What happens if the stock market crashes right after I retire?

A market crash early in retirement is risky because you are withdrawing money while your balance is down, which can deplete it faster. This is called sequence-of-returns risk. To protect against it, some people keep one to two years of spending in cash or bonds, so they do not have to sell stocks during a downturn.

Can I change my withdrawal amount if my circumstances change?

Yes. If you lose a spouse, inherit money, or face unexpected expenses, you can adjust your withdrawals. However, remember that increasing withdrawals will shorten how long your money lasts, and decreasing them will extend it. Any change affects your long-term plan.

Should I withdraw from my 401(k) or my taxable brokerage account first?

This depends on your tax situation and account balances. Generally, withdrawing from taxable accounts first lets your 401(k) grow tax-deferred longer. However, if you are in a low tax bracket early in retirement, withdrawing from your 401(k) first may be cheaper. A tax professional can model both scenarios for your specific situation.