A Calculator for S&P 500 Index Funds
concerned with 4% Rule retirement withdrawal safety

The 4% Rule was about balanced funds (perhaps a 60/40 fund, 60% stock mixed with 40% bonds), so interest in the suitability of a 4% Rule for withdrawals from a 100% S&P 500 fund interested me in this S&P calculator. This article is intended as a guide about planning a safe and sustainable investment and retirement withdrawal plan from a S&P 500 Index fund that would survive typical bad market times (like those which have actually happened, which in long term are the majority of the gains). But the long term overall rewards in good times are well worth it. Withdrawals cost far more than just the dollars withdrawn. It also costs all the long term substantial future compounded earnings those withdrawals could have earned. The best plan is of course to postpone all withdrawals until retirement, so the fund will continue growing, and will be there when actually needed at retirement. The valid concern is that continuous withdrawals during earlier years or during bear market downturns (before fund has grown to be able to survive the withdrawals too) could deplete a fund, ending it prematurely, not lasting until needed for retirement. Is 4% a right number for S&P 500 plans too?

The S&P 500 calculator and also the fund Withdrawal Survival Depletion Test are below, which examines 50 years of historic S&P 500 returns. Don't miss that, there is a lot there. Try the calculator options which can compare and show the effect of the past history and very importantly, show the effect of withdrawals (4% or any others). It certainly offers an interesting view about the years of market gains. It can also show compounding of gains over a multi-year period, including the effect of withdrawals or additional investment.

But there is also a lot more here. This page is just the calculator now (and some statistics), but the page was far too long as one page, so the introductory material describing the S&P 500 and the market and the 4% Rule was reluctantly moved to a second page at A few things to know if you don’t already. If you are new to the market, it's there if you want to see it.

Calculator for Withdrawal Survival Depletion Test

The Withdrawal Survival Test feature (below the S&P 500 calculator) performs an examination for S&P 500 Index funds to show how market drops and/or withdrawals have survived in the past bad bear market history typical of the real world over the last 50 years, from any starting year, and can be started with any fund amount. There are two parts here, the calculated S&P 500 table next, and below it, the Survival Test results where it restarts the calculator at every past table year, with any withdrawals or additions, seeking to find the survival of the bad times.

We can't know future performance, however the overall S&P annual gain has always averaged about 10% a year, even more in its good years, but then with losses in the bad years. We cannot repeat those same past years, but the same kind of periodic market crashes have always happened, and are still routinely expected now and then (the bitter with the sweet, which averages out, and the sweet wins). But is a valid future concern about retirement withdrawals being more than the situation can bear. We don't know that future situation, but if we can determine a withdrawal rate that would have always been safe in any starting year in the last 50 years, it should seem safe in the future too. This past history has some very bad years, and some very good years too, more good than bad.

We can't see the future to know when a crash might occur, but the calculator below computes "how much" occurred in past "typical" crashes. You might plan for it by having more fund money in the fund, or by allowing for reducing withdrawals, especially during bad market times.

Test it yourself (next below). This fund Withdrawal Survival Depletion Test performs the convenience of recomputing the fund beginning in each and every year in the 50 year chart, and looks at the survivability in any situation there due to any specified withdrawals. Various Start Years do cause different results depending on market year situations then, and especially of course, due to any withdrawals specified, and on how many years of opportunity follow. We don't know when future crashes will occur, and adding more investment money all along is always a great plan too (more money grows more). This is historical data, Not the future, so the exact dollar values of the past data are not significant today. But the past can be said to be "typical market situations", and it can show a lot in a glance. The idea is to show impact of withdrawals (how the market works), in situations that have happened and conceivably might happen again. The best earning plan is always "no withdrawals", but this topic is intended to be about necessary withdrawals during the 30 years of retirement.

Here, a fund withdrawal depletion failure is indicated if the fund value falls below the specified Failure Minimum Limit, which you can choose. This limit is because the limit zero does not seem useful with percentage withdrawals, like even 30% is hard to ever reach zero (at 10 cents, even 30% reduction is still not zero.) The default $100 limit does not hurt the concept, but you can change it. Entering recovery with only $100 is not optimum for fast growth, but we are looking for a busted fund near value zero here.

The best explanation of what this Withdrawal Survival Depletion Test does is seen by running a Test example. I invite you to try it with a hypothetical example with calculator initial defaults (starting with $25K in 1970) except with button 2 at $200/month withdrawal. The Test All Start Years choice will show the situation. The future is not known, but this example shows the possible risk of the specified withdrawals that have actually happened. And if the plan should fail, of course there are smarter plans.

  To see the idea, show this setup in calculator below (called Example 0)

Then while there, also instead use button 1 for 11% (which is near the average fund gain), which just always continually maintains more or less about the same fund value (withdrawal dollars to be recomputed as the same percentage every year). The 11% did not fail (because a percentage withdraws less when the market is down, but a fixed withdrawal amount just keeps on withdrawing), but withdrawing about the average gain did limit the fund value to about $19K (no growth), and the total value recoverable to about $140K (including the withdrawals) instead of the $4.7 Million if instead no withdrawals for 51 years. Withdrawals have a very high earning cost, but are of course the expected plan during retirement.

Then also try button 3 with both 11% and $200/month acting as limits on each other, smoothing the action. It is a more even and reasonable result that does not fail the Test, but the recoverable Total Value is still only about $250K (about 4.5% for 51 years).

And just to make the point about the cost of withdrawals, also try button 0, no withdrawals at all. Seeing how crashes and withdrawals work can only make any question about the withdrawal danger be better understood.

Or to make the point about a larger fund value, try button 2 and the same $200/month again that failed quickly (in each of 13 start years), but a $50,000 starting investment smooths it over and does not fail. In fact, it was enough to get past the bad years and then it still grows to $4.4 Million in 53 years. So situations differ, and the details are far from absolute. Letting the fund grow before starting withdrawals is the best plan.

But for a dramatic difference, contrast that with Example 4 below about letting the $25000 grow first (for 20 years), before starting any larger retirement withdrawals. There are no hard answers, but this is intended to be instructive. This does show past years history, and future years are unknown. It will depend on the fund value, which depends on the withdrawals you choose.

There are several more examples below. More money in the fund will always last longer, but technically, if no withdrawals, the fund does not go bust in the bad periods even if starting with only $500 in 1970. The value does fall to near 60% about three times then, if starting at 1973, 2000, or 2008, but the $500 still survives to grow to over $100K today if left undisturbed (before 2023 anyway). Any fund failures are due to your withdrawals, which should be left untouched until retirement. The Test result shows that an example of $200/month fixed amount withdrawal works if the fund value grew a little larger, or started larger, but otherwise, it also still fails in quite a few years too. Since we don't know the future, that's a serious problem that conceivably could happen again. Starting with $25K at 1970, the early fund bad times did not yet have sufficient gains in the fund to provide the withdrawal demands. As the fund decreased, the fixed withdrawal was withdrawing more and more percentage, and could not survive that. The later bad times of the 2000s also took it down so some starting years failed. If instead of a constant dollars value, withdrawing a small percentage, like 5% or even 10% (with dollars to be recomputed every year), the percentage withdraws much more when the fund value is high, but very little when the fund value is low, which helps survival considerably (fund probably never reaches zero if 5%). But a percentage is variable, and a fixed dollar amount is constant and more suitable for retirement living expenses, but contant dollar withdrawals really hits the fund hard in down years. Button 3 provides both percent and dollars as limits on each other, which can smooth it out. But all withdrawals are costly, and if no withdrawals, $25000 could have earned more than $4 Million (in 50 years, in spite of the bad years). Maybe some of those results look scary, but please also just retry it with No Withdrawals to see the really huge difference. It will not fail if no withdrawals. Leave it for retirement time. And of course, more fund money does always last longer, so plan on making that happen. There are more examples below, just some ideas to think about. Less withdrawal generates More total earned income, except it is in different time frames.

Again, this Withdrawal Survival Depletion Test cannot predict the future. It only shows historical results, assumed possibly typical of the future too, but future results are unknown. The previous bad years are useful to show examples of possible market action. The important thing is that surviving bad market years needs sufficient remaining fund value to recover, so minimizing withdrawals is important, certainly in early or bad years. Starting later also limits earnings simply because of the fewer years left to grow then.

2023 is a partial year, incomplete. The other years represent year end values.

S&P 500 Index Fund calculator with 50 year history

Starting Investment $   Start Year 1970-2023   Your Fund Fee %
  Reset settings to initial defaults ($25000 in 1970, withdrawals Off, $100 Minimum limit)
  Scroll to result table at any active setting change

Withdrawal Survival Depletion Test: Test Starting at all chart years.  Minimum value $ defines Depletion
Reset Withdrawal Survival Depletion Test mode OFF (except On in examples)
Include Test showing only any depleted (busted) fund years
Include Test Starting in All Years (including Gain and Total Return of year span)

Withdrawal and/or Investment: (these are year end actions)
Makes the selected changes below at All Years, unless adding these year limits:
Start actions 1-6 in or after Year These can shut out the years in 5 or 6
Stop actions 1-6 after Year

Reinvest all dividends
Withdraw dividends in selected action year range (Withdrawals are shown in blue)

0 No additional Withdrawal or Investment (only the Initial investment)
1 Annual Withdrawal % (All Withdrawals are shown in blue)
2 Monthly Withdrawal $ per month
3 Withdrawal is the lesser amount specified at the 1 and 2 buttons
4 Add Investment $ per month (Dollar-cost averaging)
5 Add Investments in 4 until year and thereafter make withdrawals in 3
6 Single actions of: (only one action in same year, within range of Action Start/Stop)

Year end   $  Withdrawal   Investment
Year end   $  Withdrawal   Investment
Year end   $  Withdrawal   Investment
Year end   $  Withdrawal   Investment
Year end   $  Withdrawal   Investment

Any button, or pressing Enter in an active extra field, or a will recalculate
the tables. The exceptions are the Investment/Withdrawal buttons in Option 6 are
nonresponsive, but when all are ready, click the 6 button, and they will be read.

The S&P 500 had 70 record high closes in 2021, but the last record high close was 3 Jan 2022 at 4796.56 (this chart reached $5.5 million then). But cashing in at this point simply makes the loss be real and permanent, So sit tight, and it always eventually recovers and continues growth. While it is low now is the time to invest more, before that recovery gain.
See the S&P 500 daily market action, including the frequency of the S&P 500 record highs.

Gain $
Net fund
value $
+ Div $
YearS&P yr
Close $
gain %
30-Jan-23 20234017.77
Net fund
value $
+ Div $
YearS&P yr
Close $
gain %

Chart bottom summary row: Withdrawn sum values are shown in blue. Left side of bottom row are column Sums. On right side are column simple Averages (of individual years), of all rows except 2023, which is an incomplete year so far (Annualized Return is shown in the Withdrawal Survival Depletion table next below).

Price gain does not include dividend gain or compounding. This charts overall price gain is about 4.4x, but the overall value gain is about 186x.

Just to be clear, columns 1 & 4 on bottom summary row may contain two lines itself.

S&P 500 Gain History since 1970 is seen below. Even if year 2022 lessens the effect (the 2000's decade seemed worse, but the market has always recovered), do see Example 4 below for a realistic view (S&P 500 growth for 30 years, followed by $60K per year withdrawals continuing in retirement).

There may be some unavoidable precision loss. Withdrawals and deposits and fund fees are calculated here to be from the actual previous year end result values, but those actions occur on intermediate days during the year. However the dividends and price gains do have the year end annualized factual summary data, and the calculator does appear to be pretty close to actual final past fund results. The S&P funds match the same S&P dividend percentage proportionately. The "Gain + Div" column is just the sum of the years gains, but Dividend is not included in the fund if it is instead withdrawn.

All chart values are year end values except for 2023 being a partial year. We don't know the current years final dividend percentage until we know the end of the year price. Events within the year can be exciting, but some of the intermediate history and larger changes might be hidden, since only the year end is shown. For example, the 2020 pandemic dropped to -34% in March, but recovered a new record high in five months, and to +16% at year end. There was also a sudden -18% drop 12/24/2018, but it recovered in a week to only to a -6% drop at year end, and its rapid total recovery of course continued to new record highs over four months.

Fund expense fees may seem tiny and negligible, but that percentage is every year as it grows and compounds. Enter your fund fee as zero to see the difference it makes after accumulating many years. S&P 500 funds with a small fund fee are available and advantageous, and less expense is an earning plus. I like the Vanguard VFIAX fund, with a 0.04% fee, which is $400 on one million, each year.

Fund Withdrawal Survival Depletion Test Results

The Test Mode computes starting an S&P 500 fund in many past years (computes up to 1431 year situations if no depletion failures) and watches for the fund going bust due to specified withdrawals during past market crashes. The future is of course unknown, but this is what has happened in the past. This can show the possible real effects to be ready for. The 1970s and 2000s were not good times, however we survived it, and the other years, and the last dozen years, have mostly done quite well.

The Lowest Year Value is of course typically near the starting year, but withdrawals or a later crash can lower it too. Every start year from 1970 on is shown, which can show overall fund gain results when starting any year (including any withdrawals or investments specified above). The future will be different, but we might expect similar events, sometime.

The Depletion Test shows results of All start years since 1970, but the calculator shows only its one start year. But for example, if the Test says 2000 to 2008 goes bust, you can also run the calculator manually from any Start Year of interest (like that 2000) to reproduce the intermediate year details of the results of any start year failure.

2023 is a partial year, so it is omitted from the Depletion Test. All other years use only their year end result.

Total Return is the Final Fund Value with any withdrawals added back to a total. It is the return made available to you, both already received, and that can still be withdrawn.

The Annualized Return is the hypothetical calculated interest rate so if that same fixed interest rate were paid in each of those years (like a fixed interest bank account, for comparison purposes), the compounding will produce the same total final result. The annualized return includes the value of any withdrawals during the span as income returns.

Any withdrawals and the starting investment are as currently specified in the calculator above, and are shown here if present. And then the Total Value field is the sum of the withdrawals and final fund value. Withdrawal columns are not shown in table below if none.

Here's a quick look at actual history summary of past S&P market action, in five and ten year periods. The top row 2020 period includes 2022 but is only three years. Just the two years 2020-2021 computes 23% Annualized gain. 2019 was as good, but 2022 was not. Also the first half of the 1970s and all of the 2000s were the bad times. 2023 is an incomplete partial year, so not included here. The other years are all year end data.

S&P 500 gains from $25,000 in 1970, invested dividends, with no withdrawals

Percentage Gain % =
New value - Old value
Old value
× 100

((1 + Percentage Gain %/100)1/n years) - 1) × 100 = % Annualized gain, as if each year is equal gain

Annualized math example from top row above:
Convert Percentage Gain 24.2% to 0.242x, to be ( (1 + 0.242)1/n - 1) × 100 = 7.5% annualized if n = 3 years.
Which means 7.5% gain for 3 years is 1.0753 = 1.242x growth = 24.2% gain.

All this data is history, Not the future, but it has all happened, and similar possibly could happen again. The -11% and 2% five year dips shown are at the ending value of the five year periods. The worst of those multi-year negative dips reached about -50% in 1973, 2000, and 2008, but recovered somewhat by the end of the five year interval shown in this table. Much better financial rules seem to be in place now to help the market now, but all five year periods are Not alike, and some could include bad market times (it is called "risk" and we do still have politicians in Congress). Still, if it is a worthy investment, hang in there, it does routinely recover, always has, with good gains long term. Even with a few seriously bad years, if without withdrawals, the cumulative long term compounding effect should be evident and mighty impressive.

Retirement: Maybe 30 or 40 years seems a long time away, but nevertheless, realize that money will be extremely important during your retirement. Because retirement typically means no more job or salary, so you will need planned investment savings to live on. You might have maybe 20 to 40 more years during retirement too, but the early investment grown large can continue growing during retirement too. So realize retirement age is definitely coming, and planning for it now would be very wise, and maybe allow travel and cruises then too. There are obvious advantages of having sufficient money during retirement. You might be able to plan for this in later life, however the compounding of many years of Time will be your overwhelmingly Best Investment Tool, or your Worst Wasted Loss if you wait and ignore it. So start now while you still have time for it to work. It will be too late after you need it. Realize the importance of the goal, and keep your eye on the prize. Bigger plans are possible, but an easy way is that if just $10,000 were put into a S&P 500 Index fund (for example VFIAX) in 1980 (40 years ago) and left untouched, it would be $1+ Million now, in spite of a few seriously bad times (S&P does always recover). The time takes care of it. The best plan is to start early and leave it alone and withdraw nothing until retirement needs make it necessary. Of course, adding a little to it all along is a very good thing too (especially in down markets, to buy low).

The Message again: Start Very Early, decades before you will need money for retirement. And until retirement, leave it untouched and working. Withdrawing it early to buy a jet ski would be foolish.

Withdrawals (including Dividends) are a Huge long term Cost

Speaking here of STOCK dividends, NOT of dividends from directly owned BONDS. Bonds pay an interest rate on the face price of the bond, but stock dividends come from the company's value. The company has earned profit, and you as an owner are receiving a distribution of profit.

How Stock Dividends Work

It's a huge mistake to think of stock dividends as New income to be withdrawn. It is necessary to see the whole picture.

A company's publicly held capitalized value is their number of existing stock shares multiplied by one share's price value. Apple's value this way computes to be $2 Trillion. The idea of the dividend is to share company profit with the owners. The dividend money paid out (as a few dollars per share) was removed from the company's value, as a payment into your fund. This reduces the company's value by millions, so the stock price (which reflects the remaining value of the company) is automatically and equally reduced by the same dollars per share when the dividend is paid. Due to that corresponding stock price drop, your value sum of the paid dividend and your remaining stock value remains exactly the same sum value as before the dividend, i.e., there is no gain on that day. Yes, the stock price did drop, and the fund value dropped, but you did not lose anything either — You already owned that stock distributing the dividend, and you do have that cash difference now. It was just a withdrawal. There is no gain and no loss, not from the dividend on that day. The distribution was just from the company's stock value that you already owned before, but now is instead transferred to your cash.The best and most optimal thing to do is to reinvest that dividend, which retains today's fund value, and it will also become additional shares for greater future compounded growth

If you withdraw the dividend, it is simply the same withdrawal as if you had sold that much stock. Selling stock shares does reduce the count of shares, still at same share price, but paying dividends (dollars per share) instead reduces stock share price, still at same share count. But either way, the resulting total dollar value on that first day is exactly the same total. But the dividend cash value is in your direct possession now, which you can either withdraw, or reinvest for additional shares of stock at the lower price. Your value change due to that reinvested dividend distribution is still zero difference on that first day. It was just a withdrawal that was reinvested. You do pay tax on that withdrawal, but then reinvestment adds it to your cost basis so you will not pay tax on that part again.

So what's the point? The optimum thing to do is to reinvest that dividend, and it will become additional shares. The Big Deal is that your additional shares (received and reinvested four times a year) are now greater future investment gain opportunity. If dividend is reinvested, then you will have additional shares for the same original investment cost. If each dividend was say $250, four times is $1000 a year, additional shares of investment every year, which grows and compounds. But if that dividend cash is instead withdrawn, it has no future growth possibility, at least not in this fund. It was only a direct withdrawal from your fund value. So OK, withdrawing dividends is a loss of that opportunity for much greater gain. That cost is relatively small over only a year or two, but the compounding over a few decades does lose the vast majority of the investment potential. The next table below shows that withdrawal cost.

There is only this one correct way to view dividends. Dividends come out of your own stock you already owned (in the stock's value). Any withdrawal from a fund is of course just subtracted from remaining fund value (which withdrawal is taxed then as "realized" income, but it is NOT New income, you already owned it). It may not be obvious, but the value of any stock dividend PAID (same dollars per share) is also immediately subtracted from the remaining stock price and value because the companies value is reduced by the pay out, reducing the stock price and your fund value (but you do now also have the dividend cash difference. And the stock market price might have varied further due to routine market changes.) The dividend is NOT a gain in the fund value, because the price drops equally to retain the same value (the rest of this page is those details). If dividend is withdrawn, it simply reduces the fund value (and also its future earnings), but you do have the withdrawn cash. However if the dividend is reinvested, it does add more shares (at the lowered price), so that on that day, the fund still will maintain the exact same value then (which as yet on that first day is still NOT income). But if the dividend is reinvested, the additional fund shares can gain in the future. But withdrawal of shares really do greatly limit the future compounded gains.

So withdrawing dividends would instead would be a big mistake, to be only just a simple direct withdrawal that reduces your current fund value (same as any other withdrawal). A typical dividend might be in range of 2% a year. Sounds small and insignificant, huh? No, it is HUGE when reinvested and compounded every year. There's a table below showing the devastating huge long term loss of withdrawing dividends in a S&P 500 Index fund. Stock Dividends are valuable, but withdrawing them is just a withdrawal from the fund, and Not new income.

However reinvested dividends do become additional shares which likely do add significant future compounded gain earnings (But just Not on that same first day, and Not if withdrawn.) The withdrawn dividend may seem small, but in the S&P 500 calculator above, click the "withdraw all dividends" option (or Example 2 below) to see the unimaginable compounded fund value loss in many years. It's good to know how it works.

There is another page about the high cost of withdrawing dividends. And more below on this page.

Compared to "What Could Have Been", withdrawals from funds, including dividend withdrawals, can cost much more loss than you might imagine, and might even be a fatal bust in bad market times. True of any withdrawals, but the setup of selecting dividend withdrawal likely continues forever unchanged. The many future years provide a very impressive compounding benefit, but every dollar withdrawn loses all of the future gains it could have earned, a repeated loss every succeeding year. But after the fund has grown large long term, a modest percentage withdrawal rate in retirement (like 5%, with the dollars recomputed every year) should be sustainable (then surviving up to 30 years of retirement), because the withdrawal as a percentage means the dollar amount is low when the fund value is low. Whereas fixed dollar withdrawals are pretty much the opposite effect, percentage-wise. The sustainability of a fixed dollar withdrawal rate seriously depends on the amount of money remaining in the fund. Withdrawing the S&P 500 dividends might be only about 2% a year, but the withdrawal of those "future shares" will make a huge difference minimizing compounding over many years.

Any way you do it, withdrawals are very costly to future earnings, and long term will drastically reduce the funds total growth value that it could have earned. My own notion of retirement planning is to provide a good fund early and allow it to grow long term to the maximum possible (and adding more all along will help greatly). And then only at retirement, begin withdrawing a salary replacement (plus Social Security if it still exists). If long term growth was sufficient, then perhaps a 5% withdrawal will provide living expenses, and still allow for perhaps up to 30 years of retirement. Withdrawing 5% from a $2 Million fund is $100K a year. The calculator above provides a visual way to realize this if you try some things in it (again, based on years of actual past market results instead of guessing the future).

This next example is the S&P 500 fund started with $25000, from start of the year shown through 2022 (YTD 2023 is incomplete year). Without any additional investment, but the reinvested dividend adds a few shares, but it is not large, S&P 500 ballpark is maybe 2%. But the really big thing is that dividend dollars is number of shares x share price, so the approximately 2% every year of the growing investment becomes a large number long term. Data from the S&P 500 table above, with partial year 2023 omitted.

Withdrawing dividends is extremely costly to the long term fund income

S&P 500No withdrawalsThe Cost of Withdrawing all dividends, WD
YrsFund Value
Fund Value
after WD
End Value
incl WD
Cost of

The cost of withdrawals (WD) is the money "that could have been" minus the money remaining available.

WD Cost % =  
(Final value w/No WD) - (WD + Final value after WD)
Final value with No WD
× 100

Long term, reinvesting dividends is a major part of S&P earnings. THE major part depending on definitions. That ought to get your attention. Do you really need to withdraw that (about 2+%) dividend each year, or would it (and its compounded future earnings) be better used at retirement? You might not be aware how very expensive that gets long term, but it certainly does, and there are choices. Reinvesting the dividend would add its additional shares every year for considerably more growth every year, greatly affecting final income for retirement. The exact gain values depend on market performance in the past decades, but that's true withdrawn or not, so the degree of cost of Withdrawal Loss depends on the years of duration of the compounding gains.

So don't imagine that withdrawing dividends is withdrawing income. Withdrawing dividends only lowers the fund value, same as does any equal withdrawal, no difference. Any withdrawal of same amount and timing will have the same numbers. Withdrawals are too expensive except in retirement when that is the whole intended need and planned purpose. The reported year gains can only compute the same numbers the same way. Every single digit in this table is the same for any withdrawal of the same amount. The compounding of the fund gains does work well if having the dollars to work with.

Reinvesting dividends does add shares, but without changing fund value on that day, however the new shares can add additional compounded future earnings every future year, which is the big benefit. For more, see Stock Dividends are valuable, but are not actual immediate income on next page.

Dividends in the table below are reinvested, but that table then assumes you might intend to withdraw a little all along from the start... just because it's there I suppose, except it is not there after you withdraw it. The numbers here come from the calculator above. The Cost of the Withdrawals is the possible fund value without withdrawals, minus the amount available to you (after the withdrawals and the remaining value still there). The cost is the loss that you did not get (losing the compounded gains it could have earned). Greater withdrawal is less overall gain. Partial year 2023 is omitted.

Cost of Continuous Withdrawals for 53 years
after S&P 500 Investment of $25000 in 1970

Final fund
Cost of
Cost as

So if you're going to invest, then do that, and leave it there until retirement, to watch it grow.

Fund Fees: The fees are also a continuous withdrawal. Try entering your fund fee as zero to see the difference that compounding of lost earnings cost there. Be sure you are entering the correct fee for your specific S&P fund (fees do vary significantly). The cost of the fee every year is much more than just the fee. It also continues to cost the lost earnings on it every year, compounded over the years. You definitely want to find a low fund fee.

The compounding over many years makes the long term expense of regular withdrawals become extremely high, compared to "what could have been". As the withdrawal percent increases, the fund value decreases so then it earns less, and so the dollar amount of any percentage withdrawal total also drops. The 2% case is comparable to just withdrawing all the S&P 500 dividends, the effect is the same. It should be a sobering thought. I don't mean to be preachy, but awareness is my goal. At least evaluate the actual need first. Just because it is there seems the worst reason to withdraw it. The best reason for withdrawals to wait is that your need is likely greater at retirement time. A common purpose of mutual funds is of course for the withdrawals to support retirement, but that idea is to first invest for 20 or 30 years without withdrawals to build up the fund, so you can have something to withdraw in retirement. You can take action on that NOW. Do realize that you are not simply subtracting the withdrawals. The big deal is that you are also subtracting all the years of compounded gains those withdrawals could have earned (which is a hugely larger number). The better idea is to let the fund accumulate something first. See Example 8 below.

The magic of the gains is that the growth is compounded, with the gains earning more gains, year after year, increasing dramatically after a couple of decades. But continuous withdrawals are a real big thing affecting a fund, reducing the gains and the compounding, again over many years. If you withdraw more, you get much less. You can see the result yourself in the calculator above. Imagine investing $25,000 one initial time in a S&P 500 fund for 50 years (historic S&P 500 data from 1970). That span could be at your age 25 to 75. If you're young, you need to realize those many available years are the huge magic opportunity, which diminishes if you wait. Just ten years might be impressive, but 50 years is simply awesome.

Just to be clear, withdrawals during retirement are certainly an expected main purpose of the market funds, but earlier withdrawals are detrimental to that possible "what could have been" retirement income. This is especially true during long term, when the compounding can make so much difference.

One purpose of these examples is to show some of the controls possible in the calculator, but the really big point is that if no withdrawals, 50 years of S&P 500 gains will be absolutely awesome. Retirement time will come, ready or not, and you need to realize that you should get started on it NOW. Time is the tool that works, but if you wait too long, this huge opportunity diminishes.


If not withdrawing, the fund will not go bust. Very bad times in the past have dropped it to near 50%, but not to very near zero. That will certainly be very worrisome then and requires waiting for its recovery, but if you let it ride, it will recover. The market has always recovered (but which sometimes could take a year or two). But withdrawing it then just makes the loss real and permanent. The S&P 500 companies are very well established, and it will come back. Following are a few examples of that in the last 50 years.

This is looking at some choices with investment starting with $25,000, to show the good effect of minimizing withdrawals. The example results are more in agreement with the 2021 totals. The exact result values in these examples will vary from the last 2023 result entered in the calculator chart (the text in these examples below is Not updated with every days current price change, but the calculator itself will recalculate from the last price entered.) You can of course then adjust the values to fit your goals. Again, these results are computed from the past years in history, and future results are not known. The standard qualifying words are: Past success does not guarantee future performance.

1. Start at 1970: (53 years until today) If with no withdrawals of any kind, $25K grew to $5.3 Million today. This is the pages initial default case. The message is: Start your investing early. It will be all-important when you near retirement age.
So try some things. Starting with only $1000 (with no withdrawals) would get past the bad years and end with $195K. The bad years are survivable, but withdrawals may not be. (Again, the future is unknown, but some of the past was pretty bad, until it recovered.)
  1 Show this setup in calculator (it just restores the initial chart).

2. Withdrawing dividends (for 50 years from $25K start) instead reduces gains of less money working, which drops to "only" $1.25 Million final growth. DO NOT ignore the long term importance of reinvesting dividends. The dividend may be small, like maybe 2%, but it repeats and compounds and grows, every year. The point is that in 50 years, withdrawing the then $259K dividends cost $3.8+ Million loss of future long term growth.
  2 Show this setup in calculator

3. Or instead of dividends, continuous withdrawal of $100 per month (totaling $62K in 53 years) dropped the fund to $17K first (in 1974 which was particularly bad times), but it survived, and grew to $2.3 Million in 53 years. However that $62K of withdrawals cost $4 Million of the gains in example 1 (over 50 years). Give that some thought concerning withdrawals.
  3 Show this setup in calculator

A few more things you might see here about how things work.

While it may not be intuitive during the bad times of gloom and doom and worry about the market, but actually, those low points are exactly the right time to be adding more money then (to buy low), making recovery gains grow dramatically. The low points would be the worst time to sell it off. It recovers, but it could take a year or two.

4. This might get your attention... a more expected procedure. 30 years S&P 500 investment followed by 22 years of $60K per year withdrawals in retirement.

Continual withdrawals beginning Day One is NOT a normal plan. To make the fund count with greater gains, let it build for many years until retirement time, and only then start withdrawing to help replace salary. Or maybe if already retired and you have some savings that are not earning anything, but need it to help with immediate withdrawals for living expenses. The S&P is capable with higher gains that have averaged about 10% a year. Some years more, and some years less, and some even negative several times. And BIG negative (near -50%) a few times. Again, the S&P 500 is the stocks of the 500 largest USA companies, relatively safe IMO. Market crashes can certainly still occur, but they always recover eventually. But when moving savings, do realize there is market risk, stocks can lose value (and unless it is IRA or 401, moving is likely a taxable event).

Just to see a retirement situation, starting with $25,000 in 1970, set Button 3 with both 30% in 1 and $5000/month in 2 for withdrawal limits (and starting withdrawals at year 2000 for 30 years growth first (and the 2000 decade was a mighty bad market time) and then expected 25 years remaining. This could be age 30 to 65 retirement, with first 30 years for it to grow, and then likely lasting 30 years in retirement (we only see 22 years so far 2022) Using both limits of the $5000/month fixed withdrawal number with 30% limit keeps the more excessive withdrawals down when the fund is at highest or lowest values. This past data does survive if starting at any past year (the past is not the future, but just meaning in similar market conditions in future years). Or increasing the investment all along as possible is certainly a good plan too.
  4 Show this setup in the calculator

This is past data (but includes several really poor years, possibly typical), so caution is advised in the future real world. This idea is to let it grow to a very substantial value before starting withdrawals, and then keep an eye out on the gain of future years then. If the average gain is keeping up with the average withdrawal, it will work. The average S&P gain has been near 11%, but 2000 began three years averaging about -15% (which then of course still did recover).

5. An IRA account has a $6000 annual contribution limit, which increases a bit every few years. This example starts Dec 31 1979 with first $6000, and then continuously add the maximum tax-free contribution of $500 per month ($6000 per year IRA limit until 2004, contribution totaling $150K in the 25 years). It grew to $1 million in that time (which included the 2000s decade), and to $5 Million in the next 22 years until now. There will be a lot of tax owed on the IRA, but you would like that at retirement time, it certainly seems worthwhile. If it were Roth, it would be tax free.
  5 Show this setup in the calculator

6. Start at 2000: (Buy low, when it is down, except it gets worse in 2008). The 2000s were really bad times with two severe crashes in the decade (2001 and 2008), so bad it didn't recover until 2007. But if no withdrawals of any kind, $25K still grew to $118K today, which is not too shabby, still about 4.7x. And the Test result shows this same thing (as no withdrawals), starting in every year, same $118K if starting in 2000.
  6 Show this setup in the calculator

But then instead of withdrawing anything, adding more money at the low points is the special opportunity to see dramatically greater gains in the recovery. Adding $25K more in 2002 (doubling original investment when price was down about 40%, and things looked so bad) would total $282K in 2021. We can't time the bottom, so had this been the plan, you'd done it earlier, and continued adding all along.

7. Start at 2009: (12 years) These were the better good times, building from the previous 2008 lows, and if with no withdrawals, $25K grew to $165K in about that time. But economic and political pressures can hurt the market, so there is always risk. But so far, the market has always recovered and continued the gains.
  7 Show this setup in the calculator

Perhaps of the most interest to the concept, 8 and 9 are results of two of what turned out to be the worst-timed bad investment times (unavoidable because the future is unknown. But it does recover.)

8. Start a $25K investment at 1973 right before the 1974 crash and see it drop 40% then. But don't touch it for 27 years, and then start withdrawing 8% in 2000 (just in time for a really BAD decade, which turned out to be some of the worst scary times, but your fund had resources by then to withstand it). So from 2000, start 22 years of retirement withdrawals totaling $785K, varying widely but averaging perhaps about $36K annually (about $3000 monthly). And it still leaves about $670K remaining today, maybe for inheritance (often a goal). The entire cost to you was the original $25K (this is past history, it cannot predict the future, but there are better times than this example hits).
  8 Show this setup in the calculator

However, the abnormally large 8% withdrawals in the first three years of the 2000 downturn were detrimental. But if instead of 8%, try withdrawing a fixed $3000 a month (button 2, starting at year 2000 again) works if starting in 1973, but this fails early if not starting until the 1980s. A large fixed withdrawal in a small fund hits the down years heavy. Whereas a reasonable percentage (assuming dollar amount is readjusted each year) is a smaller withdrawal in those down years. Even $200/month starting at Day One (when fund is small) fails several years in the 2000s.

So a good plan is to use button option 3, with say BOTH of the same 8% and $3000 withdrawals as limits on each others extremes, which limits a few years to be a little less, but which lets it build more, and then it runs in all years without failure. A percentage withdrawal may not be so much when the fund is low, but it won't go to zero and fail (if withdrawal dollars are adjusted accordingly each year). We can't know the future, but the total of all the many years is the really huge effect.

9. Start investment at 2000 right before those crashes. Start withdrawing 6% in 2003 (right after the first crash), which is 21 years of withdrawals totaling near $24K for average of about $1.1K annually, with $40K remaining today. The last decade (2010s) saw good market growth, doubling in spite of the withdrawals. This growth time is short, but starting with 2x more money would have 2x greater results. To get that greater money (still trying to get your attention), simply starting ten years earlier would have made the 6% be near $6K average annual income assistance, with $175K left. Or 20 years earlier would be about $29K withdrawals with $850K left. Or 30 years earlier for $51K withdrawals with $1.5 Million left. Time is the awesome tool.
  9 Show this setup in the calculator

10. Starting the fund just before bad years is Not the best plan, but we can't know the future. It is only shown as worst case. But one example that works anyway. Start in 1970 with $25K, and then with button 5, contribute $100/month until 2000 ($186K more) when worth $3.8 Million, and then withdraw $4000 a month ($48K a year for $1.2 million, but limited to 10%), which still remains worth nearly $15 Million. Except if it were are an IRA, the large gain would surely make the RMD be greatly higher.
  10 Show this setup in the calculator

These are just some examples from past history, but it is suggestive of the way things work, and the things that possibly (or typically) can happen in the future. There are noticeably more good years than bad, and the S&P 500 has always averaged about 10% annual gains, but there are a few down years. The bad times might last a year or two, and might drop 50%, but they have always fully recovered (2009 was special and took several years though). Withdrawing the money when it is down in bad times is the worst thing to do, because it absolutely guarantees that the loss becomes real and permanent. Instead adding more investment money when the market is low is a great opportunity offering large gains when the price recovers (buy low, sell high). Hang in there, stay the course. It can seem dark and gloomy and fearful at the time, but withdrawing all money then ends it all (and makes the loss very real). But the market has always recovered to continue the gains.

Also see next pages:

General Info describing S&P 500, the market, and the 4% Rule, IRA RMD, etc.

Stock Dividends are valuable, but withdrawing them is Not income

S&P 500 daily Action, and Count of annual S&P 500 record highs

Compare performance of 70+ stocks

Copyright © 2021-2023 by Wayne Fulton - All rights are reserved.

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