How long will my money last calculator

Understanding how long your money will last isn't just about dividing your savings by your monthly expenses. Real-world financial planning requires factoring in the invisible forces of inflation and compound interest. Without these, any calculation is just a snapshot of a static world that doesn't exist.

When you input your numbers into the Money Calculator, the algorithm doesn't just do simple division. It runs a month-by-month simulation of your financial life. Every month, your expenses grow slightly due to inflation, eroding your purchasing power. Simultaneously, if you have entered an investment return rate, your remaining balance grows. Your true "financial runway" is the exact point in the future where your compounding expenses overtake your compounding returns and deplete your principal balance.

Inflation vs. Compound Interest

Think of inflation as a slow leak in your financial bucket, typically draining 2% to 3% of your purchasing power annually. If you have $100,000 under your mattress, in 24 years (assuming 3% inflation), it will only buy what $50,000 buys today.

Conversely, compound interest is the hose filling the bucket. By investing your savings in a diversified portfolio, you generate a "nominal return." The difference between your nominal return and inflation is your real return. If your investments return 7% and inflation is 3%, your real growth is 4%. As long as your withdrawal rate stays below this real return, your money could theoretically last forever.

To get the most accurate projection of your financial runway, follow these steps when filling out the calculator:

• Current Savings: Enter the total liquid assets you plan to use for this period. Do not include tied-up assets like the equity in your primary home unless you plan to sell it. Include checking, savings, and accessible brokerage accounts.
• Monthly Expenses: Be brutally honest here. Look at your past 3 months of bank statements. Include housing, food, insurance, healthcare, transportation, and discretionary spending. Don't forget to divide annual expenses (like property tax or holiday shopping) by 12 and add them to this monthly figure.
• Monthly Income: If you are completely retired or taking a full break, this might be zero. However, if you have a side hustle, rental income, or dividends that pay out as cash, enter that amount here. This acts as a buffer, reducing the amount you need to withdraw from your principal.
• Advanced Options (Crucial for Accuracy): Toggle the advanced options to reveal Inflation and Investment Return. For a conservative estimate, set inflation to 3% and investment returns to 4-5% (assuming a balanced portfolio).