Two risks that averages hide
When you plan a withdrawal with a calculator, you enter an average return and an inflation rate. That makes sense because it keeps the calculation transparent. But two risks easily slip out of view: inflation, which erodes the purchasing power of your withdrawal over decades, and the sequence of returns, which can decide the success or failure of the withdrawal phase.
Risk 1: inflation
At 2 % inflation, one euro loses about a third of its purchasing power in 20 years and about half in 35 years. If you withdraw 1,500 € a month today and never raise the amount, you will be living on about 1,000 € in real terms in 20 years. That is why many plans raise the withdrawal by inflation each year. This costs duration: with 300,000 € and a 4 % return, a constant 1,000 € a month lasts indefinitely, whereas with an annual 2 % increase it lasts almost 35 years.
In our Withdrawal Plan Calculator you set the annual increase. The chart also shows a dashed line with the capital in today's money. This shows you that even a portfolio that is stable in nominal terms can shrink in real terms.
Risk 2: the sequence of returns
In the saving phase the order of good and bad years hardly matters: in the end, the average return counts. In the withdrawal phase it is different. If you sell units in a crash to fund your withdrawal, you sell at low prices. Those units are then missing when the market recovers. Experts call this sequence of returns risk.
A simplified example: 300,000 € capital, 18,000 € withdrawn at the start of each year, 20 years. Both scenarios have exactly the same annual returns, only in reverse order: two losses (−20 % and −10 %) and 18 years of +6 %.
| Scenario | Losses | Result after 20 years |
|---|---|---|
| A | in the first two years | portfolio empty in year 18 |
| B | in the last two years | about 165,000 € left |
Same average return, completely different outcome. The first years after withdrawals begin are therefore the most critical.
What you can do about both risks
- Cash reserve: keep two to three years of withdrawals in a savings account or short-term bonds. In a crash you draw on the reserve and do not have to sell equities at rock-bottom prices.
- Flexible withdrawals: skip the inflation adjustment in weak years or reduce the withdrawal slightly. Even small adjustments extend the duration considerably.
- Cautious planning: calculate with a lower return than the historical one and with inflation of at least 2 %.
- Diversification: a share of less volatile investments cushions losses at the start of the withdrawal phase but lowers the expected return.
- Regular review: recalculate the plan once a year with the current portfolio value.
Why the calculator still works with averages
Simulations with random returns produce probabilities, but they are hard to interpret and depend heavily on their assumptions. A constant return, on the other hand, clearly shows how capital, withdrawal, duration and inflation interact. So use the calculator with a buffer: calculate a cautious scenario and check whether your plan still holds up. You can see immediately how strongly a lower return matters by moving the slider.
Conclusion
Inflation and the sequence of returns are the two risks that simple calculations often underestimate. With a cash reserve, flexible withdrawals and cautious assumptions they can be reduced considerably. The basics of withdrawal plans are covered in the main article Withdrawal Plan: How to Turn Your Portfolio into a Monthly Income. No investment advice; as of 24 September 2026.