$1 Million at 4%: How Much Can You Withdraw Each Month?
- $1 million at a 4% withdrawal rate pays $3,333 a month
- Here's exactly how that payment is calculated, adjusted for inflation, and paid out
$1 million at a 4% withdrawal rate pays $40,000 in year one, or $3,333 a month, before taxes. That part is simple multiplication. What trips people up is what happens in year two, and year ten, and year twenty, because the 4% rule doesn’t mean withdrawing 4% of your balance every single year.
The rule works like this: you withdraw 4% of your starting balance in year one, then adjust that same dollar amount for inflation every year after, regardless of what the market does to your balance. Understanding that mechanic is the difference between using this rule correctly and misapplying it.
Year One: The Starting Withdrawal
On a $1 million portfolio, a 4% withdrawal rate means pulling $40,000 in the first year of retirement. Spread monthly, that's $3,333.33. This is where most explanations of the rule stop, but it's really just the starting point.
| Withdrawal Rate | Year One Annual | Year One Monthly |
|---|---|---|
| 3% | $30,000 | $2,500 |
| 4% | $40,000 | $3,333 |
| 5% | $50,000 | $4,167 |
How the Withdrawal Changes After Year One
This is the part that surprises people. After year one, you don't recalculate 4% of your current balance. You take last year's dollar withdrawal and increase it by inflation. If inflation runs 3% in year two, your withdrawal becomes $41,200, not a new 4% calculation against whatever your balance happens to be that year.
Why does it work this way? Because recalculating a fresh percentage every year against a fluctuating balance creates wild swings in retirement income, sometimes forcing painful cuts right when the market is down and you need income most. Fixing the dollar amount to inflation instead of to the balance gives you a steady, predictable paycheck. The tradeoff is that your withdrawal rate as a percentage of the current balance will drift up or down over time depending on how the portfolio performs.
What the Withdrawal Looks Like Over Time
Here's an illustrative example of how the dollar withdrawal grows over a retirement, assuming 3% annual inflation. This shows the withdrawal schedule only, not what happens to the underlying balance, since actual market returns will push the balance up or down independent of this schedule.
| Year | Annual Withdrawal | Monthly Withdrawal |
|---|---|---|
| Year 1 | $40,000 | $3,333 |
| Year 5 | $45,020 | $3,752 |
| Year 10 | $52,190 | $4,349 |
| Year 20 | $70,175 | $5,848 |
The dollar figure keeps climbing, which is the point: it's designed to preserve your purchasing power, not just hold the number steady while inflation quietly erodes what it buys.
Why Sequence of Returns Risk Matters Here
Two retirees can start with the identical $1 million and the identical 4% rule, and end up in very different places, purely based on the order their market returns arrive in. A retiree who hits a market downturn in years one and two is withdrawing a fixed, inflation-adjusted dollar amount from a shrinking balance, which can permanently damage how long the portfolio lasts. A retiree who gets strong early returns barely feels the same withdrawals at all.
This is called sequence of returns risk, and it's the single biggest argument for building in flexibility rather than treating the 4% rule as a rigid formula. Some retirees use guardrails: if the portfolio falls below a certain threshold, they skip an inflation adjustment or trim spending for a year, rather than mechanically withdrawing the scheduled amount regardless of market conditions.
The Wealth Building Spreadsheet Pack includes a retirement tracker that shows your real number, not a guess.
Stop Guessing Your Number
Model Your Own Withdrawal Schedule
Every portfolio, timeline, and inflation assumption changes this math. The FIRE Calculator runs your own numbers instead of a generic average.
Find My FI Number: $19Alternatives to a Straight 4% Withdrawal
- Fixed percentage of current balance. Withdraw 4% of whatever the portfolio is worth each year. Income varies with the market, but the portfolio is far less likely to run out completely.
- Guardrails approach. Adjust spending up or down based on portfolio performance hitting predefined thresholds, giving more stability than a pure percentage but more flexibility than a fixed schedule.
- Bucket strategy. Keep one to two years of withdrawals in cash or short-term bonds, so you're not forced to sell stocks during a downturn just to fund that month's withdrawal.
FAQ: $1 Million at a 4% Withdrawal Rate
How much can I withdraw monthly from $1 million at 4%?
$3,333 a month in year one. That dollar amount then increases each year to keep pace with inflation, rather than being recalculated as 4% of the current balance.
Does the 4% rule recalculate every year based on my balance?
No. The traditional version fixes your first-year dollar withdrawal, then adjusts that amount for inflation each subsequent year, regardless of how the portfolio balance moves.
What happens if the market drops right after I start withdrawing?
This is sequence of returns risk. Early losses combined with continued fixed withdrawals can meaningfully shorten how long a portfolio lasts compared to the same losses happening later in retirement.
Is there a safer way to withdraw from $1 million?
Some retirees use a guardrails approach or a variable percentage strategy instead of a fixed schedule, trading some income predictability for a lower risk of running out of money.
Drop a comment and tell me: are you planning around a fixed dollar withdrawal, or a percentage-of-balance approach?
The 4% rule is a starting framework, not a contract with the market. Understanding exactly how the withdrawal schedule works, and where it can break down, is what turns a rule of thumb into an actual plan you can trust.
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You finished: $1 Million at 4%: How Much Can You Withdraw Each Month?
- $1 million at a 4% withdrawal rate pays $3,333 a month
- Here's exactly how that payment is calculated, adjusted for inflation, and paid out.