Illustration tool
How long will your capital provide income?
Enter your capital, the annual income you want, and your horizon. We will show how likely the capital is to last, and why it is not only the average return that matters, but the order of returns too. This is an illustration based on your assumptions, not a forecast.
Drawing €32,000 a year from €800,000 over 30 years, the capital lasts in roughly 57 of 100 illustrated scenarios, and runs out sooner in 43. It is the order of returns, not just the average, that decides which side you land on. This is an illustration, not a forecast. What makes sense for you is best discussed in person.
| Year | p5 | median | p95 | Poor sequence of returns |
|---|---|---|---|---|
| 0 | €800,000 | €800,000 | €800,000 | €800,000 |
| 4 | €486,252 | €730,503 | €907,929 | €262,338 |
| 8 | €329,326 | €649,240 | €922,325 | €54,919 |
| 12 | €195,348 | €562,036 | €932,682 | €0 |
| 16 | €74,664 | €466,373 | €932,834 | €0 |
| 20 | €0 | €365,235 | €917,269 | €0 |
| 24 | €0 | €248,270 | €891,874 | €0 |
| 28 | €0 | €130,030 | €837,244 | €0 |
Both paths have the same average return. The one that hits its bad years early, while you are already drawing income, can run out, while the other survives. That is sequence-of-returns risk.
What this assumes Conservative
- Average annual return (real)
- approx. 2%
- Annual variability
- approx. 7%
- Method
- 5,000 simulations (Monte Carlo)
In the model the market is not smooth: it moves between calm (+4%), normal (+2.5%) and stress (-8%) years, and the figures above are the long-run average across all simulations. Because returns vary, money compounds a little more slowly than this average. All figures are real (in today's money). These are illustrative assumptions you can change, not a forecast and not JonatanMars Invest performance.