Investment drawdown calculator: how long your capital will last

You spend a significant part of your life saving for old age. After retirement, when you stop earning income from your employment, the opposite is the case. You usually start to “draw down” what you have saved. This means that you use your assets (e.g. your pension capital) to cover the cost of living, major expenses and perhaps also to fulfil long-cherished dreams. This is called “investment drawdown” or “spending down” and needs to be planned properly. After all, your money should last for the rest of your life and perhaps also help make life a little easier for the next generation.

You’ve worked hard all your life. After retirement, you should have time to enjoy your life. This is only possible if your wealth can sustain you well into old age. You should pave the way for this at an early stage with a well thought-out retirement plan. Because at some point, the question arises: “How much money do I have left for the rest of my life?”

That’s why it’s so important to address your future income situation in good time. This includes answering the “pension or lump sum” question – one of the most important financial decisions you will make in your life. If you choose the lump sum, you take on the responsibility of managing your available capital so that it lasts for the rest of your life. To ensure this, you need to answer questions such as:

• How much money do I need each month in addition to any AHV/AVS pension to cover my expenses? How will my budget change as I get older (e.g. for living or care costs)?
• What will my life plans be after retirement?
• How should I structure my assets and how should I invest the capital that I won’t need in the next few years to offset inflation-related losses while still securing it?

Expert advice and personalised, comprehensive financial planning are particularly worthwhile at this point in your life, given the complexity of these issues.  

Managing withdrawals is just as important as accumulating wealth, which is what you have been doing so far. Here’s how to take a strategic approach:

1. Create a withdrawal plan: determine how much you need to withdraw annually or monthly to cover your living expenses. Alternatively, you can calculate the maximum amount of money you can take out each year or month based on your available assets and your target age.
2. Factor in taxes and inflation: keep an eye on tax aspects and inflation trends to avoid surprises.
3. Remain flexible: review your withdrawal plan regularly and adjust it if necessary to reflect new circumstances.
4. Define your investment strategy: your assets should keep working for you even in retirement. Pursue the investment strategy that suits your needs, taking into account your investment horizon, risk capacity and risk appetite. This helps you identify and seize opportunities for returns and preserve your assets for as long as possible, despite inflation and regular withdrawals. After all, statistically speaking, you still have several decades of life ahead of you. “Drawing down” your assets means using them in a way that offers you security and quality of life well into old age.
   

A drawdown plan – also known as a withdrawal plan or investment drawdown plan – is the opposite of a savings plan. Instead of paying in money regularly, you withdraw amounts from your accumulated assets at fixed intervals. The remaining assets remain invested, for example in equities or bonds, so that you can continue to benefit from potential returns.

This gives you a predictable stream of payouts to supplement your income or maintain your standard of living – in retirement, for example.  

The ideal withdrawal amount depends on several factors – such as the investment sum, the planned term and the return achieved. 

Rule of thumb: divide your invested assets by the desired term. 

An annual withdrawal of around 4-5% of assets is often used as a guide to ensure that capital is preserved over the long term. 

A personalised calculation will help you find the right rate of withdrawal for your situation. 

Inflation reduces the purchasing power of your money over the years.

A fixed withdrawal in Swiss francs therefore loses value over time.

With a well-thought-out investment strategy, you can counteract this effect:

income from equities, bonds or other real assets allows you to maintain or even increase your wealth in real terms.  

The withdrawals themselves are generally tax-free and do not count as income.

However, earnings from the investment of fund assets – such as interest or dividends – must be taxed as income, as is customary with non-tax-qualified investments.

The tax burden may vary depending on the canton and your personal situation.

A tax-optimised withdrawal structure can help you use your assets efficiently.  

Retiring early extends the withdrawal period. As a result, your capital may be used up earlier.

In this case, the withdrawal amount and investment strategy should be reviewed and adjusted if necessary.

Taking the time to plan early on will ensure that your assets last in the long term even if you retire early.  

Your investment strategy determines the relationship between the potential return and the risk of your invested assets.

Bonds are less volatile, but offer lower returns.

Equities can generate higher returns but are subject to greater market fluctuations.

What matters is that your strategy suits your risk capacity, risk appetite and investment term.

A good mix helps maintain a balance between returns and security.  

A drawdown plan should be reviewed regularly – ideally once a year or if your circumstances change significantly. Examples include retirement, major expenses, inheritance or adjustments to your financial goals.

As a general rule, investment strategies have a long-term focus and should also withstand short-term market fluctuations. What matters most is not reacting to every market movement but maintaining investment discipline and sticking to your chosen strategy.

By regularly reviewing your drawdown plan, you can ensure that your payout strategy continues to suit your needs, goals and financial situation. That way, your wealth stays perfectly on track – even in retirement.