Withdrawal Plan: How to Turn Your Portfolio into a Monthly Income

From saving to spending: the underrated second half

A lot is written about saving: savings plans, compound interest, costs, the right mix of stocks and bonds. Surprisingly little is written about what comes next. Yet at the latest when you retire, step back from work or receive an inheritance, a very different question arises: how do I turn a pile of wealth into a reliable monthly income without running out of money too early?

The answer is a withdrawal plan – in Germany called Entnahmeplan or Auszahlplan. The principle mirrors a savings plan: instead of paying in a fixed amount every month, you pay yourself a fixed amount every month. The rest stays invested and keeps earning returns. With our Withdrawal Plan Calculator you can work through any variant in seconds. This guide explains what is behind the numbers.

The four key questions of every withdrawal plan

Every withdrawal plan depends on four figures: capital, monthly withdrawal, duration and return. If you know three of them, the fourth can be calculated. This leads to the typical questions the calculator offers as separate modes:

• How long will my money last? You know capital, withdrawal and return and want to know when the portfolio is empty.
• How much can I withdraw? You know how long the money should last, for example 25 years, and are looking for the matching monthly amount.
• How much capital do I need? You know how much you need each month and are looking for the target sum – the classic question of financial independence.
• Perpetual withdrawal: You only want to withdraw the returns so that the wealth is preserved, for example for your heirs.

The maths: the annuity formula

Without tax and inflation, a withdrawal plan is simply a loan in reverse. The capital pays you a constant instalment until it is used up. The instalment follows from the annuity formula:

Monthly withdrawal = capital × r / (1 − (1 + r)⁻ⁿ)

Here r is the monthly rate and n the number of months. Our calculator uses the so-called conformal monthly rate: 4 % a year becomes roughly 0.327 % a month, so that twelve months compound to exactly 4 %. A worked example:

• Capital: 300,000 €
• Return: 4 % a year
• Duration: 25 years (300 months)
• Result: about 1,572 € a month, after which the capital is used up.

In total you pay yourself about 471,500 €, even though you started with only 300,000 €. The difference of just over 170,000 € is the return the remaining capital earns during the withdrawal phase. That is exactly the difference between a withdrawal plan and money under the mattress.

Perpetual withdrawal: take only the returns

If you withdraw only about 982 € a month from the same 300,000 €, the capital stays at 300,000 € indefinitely at a 4 % return. You live solely on the returns. This variant is called a perpetual withdrawal. It is attractive if you want to leave wealth to others or do not want to commit to a particular life expectancy – but it requires much more capital for the same income.

Beware, though: preserved in nominal terms does not mean preserved in real terms. After 25 years of 2 % inflation, 300,000 € only has the purchasing power of about 183,000 € today. To preserve wealth in real terms, you may only withdraw the part of the return that exceeds inflation. At a 4 % return and 2 % inflation, that is only about 491 € a month at the start – but the amount rises with inflation every year.

Inflation: the silent opponent

Most people do not want the same number of euros every year but the same purchasing power. If you manage on 1,500 € today, you will need almost 2,230 € in 20 years at 2 % inflation. That is why the calculator lets you set an annual increase. The effect is substantial:

Depending on the plan, inflation costs you about seven years of duration or roughly a fifth of the starting withdrawal. Ignoring it means planning too optimistically. Read more in the article Inflation and Sequence of Returns.

Taxes: only the gain share counts

A common misconception is that every withdrawal is taxed at 25 %. In Germany, only the gain share is taxed. If you paid in 180,000 € and the portfolio is worth 300,000 € today, 40 % of the portfolio is gain. Only about 40 % of each withdrawal is then taxable. For equity funds, 30 % of that is tax-free (partial exemption under § 20 of the Investment Tax Act), and the saver's allowance of 1,000 € (2,000 € for jointly assessed couples) covers another part.

In the example with 1,500 € a month, only about 1,100 € of tax is due in the first year – less than 7 % of the withdrawals. The tax burden rises over the years, however, because the gain share in the portfolio grows. Details and a full worked example can be found in the article Taxes on Withdrawals.

The 4 % rule as a rule of thumb

Anyone looking into withdrawal plans soon comes across the 4 % rule. It stems from US studies of the 1990s and says: if you withdraw 4 % of your portfolio in the first year and raise the amount by inflation each year, you would almost always have lasted 30 years in the historical US data. Conversely, it implies that the required capital is 25 times the annual withdrawal.

As a rough guide the rule is useful; as a planning basis it is limited: it ignores German taxes and costs, comes from an exceptionally strong stock market and applies to 30 years, not 40 or 50. The calculator therefore shows it only for comparison. More in the article The 4 % Rule.

What return is realistic?

The most important and at the same time most uncertain input is the return. Use the return after costs, i.e. net of ongoing fund charges and custody fees. A pure equity portfolio has historically earned more over the long run than a mix with bonds or cash, but it fluctuates more. Many plans for the withdrawal phase therefore work with a mixed portfolio and 3 to 5 % a year. A comparison shows how powerful this lever is: with a starting withdrawal of 1,500 € and 2 % inflation, 300,000 € lasts almost 17 years at a 2 % return, just over 20 years at 4 % and more than 27 years at 6 %.

So always calculate several scenarios and plan with the more cautious one. A constant return is a simplification anyway: in reality good and bad years alternate, and bad years at the start of the withdrawal phase weigh particularly heavily.

Typical mistakes in a withdrawal plan

• Forgetting inflation: a fixed euro amount loses purchasing power year after year.
• Assuming too high a return: one percentage point alone decides years.
• No reserve: without a cash buffer for two to three years you have to sell units at rock-bottom prices in a crash.
• Too short a duration: if you plan for 20 years at 65, you may still have many years ahead of you at 85.
• Overestimating or ignoring taxes: both lead to wrong decisions. Only the gain share is taxable.
• Never adjusting the plan: a withdrawal plan is not a contract with yourself. Review it every year.

Think of the withdrawal plan and the state pension together

For most people in Germany, a withdrawal plan supplements the statutory pension. How much of it remains after tax and social contributions can be calculated with the Net Pension Calculator. The gap to your spending is then the amount the withdrawal plan has to close. If you want to stop working earlier, you can also use the portfolio to bridge the years until your pension starts and reduce the withdrawal afterwards.

Still in the saving phase? The ETF Savings Plan Calculator shows what capital your plan can build up by retirement, and the Compound Interest Calculator shows how strongly compounding works over the years.

Conclusion

A withdrawal plan turns wealth into a predictable income – provided capital, withdrawal, duration and return fit together. Take inflation into account, calculate with cautious returns and do not forget taxes, which are usually lower than feared. Try out different scenarios in the Withdrawal Plan Calculator. All information is for guidance only and does not replace individual investment or tax advice. As of 24 September 2026.