Capital required to live off investment income

“How much capital do you need to live off your investments?” Most answers give a single figure. That is exactly the trap: the capital required hinges almost entirely on the return you assume. At equal expenses, moving from a 3% real return to 4% cuts the target capital by a third; dropping to 2% multiplies it. Rather than a reassuring number, this simulator shows the curve — to make visible how much your goal is hostage to one assumption.

Output from a simplified model, depending solely on the assumptions entered. The return is an assumption, not a guarantee, and real returns are never constant. Neither advice nor a personalized recommendation.

The principle: capital whose income covers expenses

“Living off investment income” means a theoretical situation where the income from capital covers everyday expenses without relying on a salary. To preserve capital over time — the assumption used here — you withdraw only what the capital produces in real terms (net of inflation). The capital required is then: annual expenses ÷ withdrawal rate. At a 3% rate you need 33 times annual expenses; at 4%, 25 times. The safety margin lowers the rate you rely on, to absorb bad years.

Why the return must be real, not nominal

This is what most calculators quietly skip. If you withdraw 4% from capital returning 4% nominal while inflation runs at 2%, you erode 2%/year of the capital’s purchasing power: it shrinks silently. To live off investment income durably, the withdrawal rate must stay below the real return. That is why this tool reasons in real return — the distinction is developed in the real return after inflation simulator.

Capital preservation ≠ the 4% rule

The famous 4% rule (Trinity Study) does not preserve capital: it allows you to consume it gradually over roughly 30 years, in a US context 1926–2023 with a 60/40 portfolio. It therefore requires less capital than the perpetuity approach used here. Neither is universal or guaranteed: under low real-rate or high-inflation regimes, the sustainable withdrawal rate can be markedly lower. Sequence-of-returns risk — bad years early in drawdown — can compromise a path that looks viable “on average.”

The three variables that set the capital

• Expenses: the starting point. The higher the target standard of living, the higher the capital, proportionally.
• The real return assumed: the most sensitive variable — the one where a single point flips the target capital. The 3–5% range is a commonly cited prudent reference, not a norm.
• The safety margin: a cushion for taxes, inflation, lean years and surprises, by lowering the rate you rely on.

A framing tool, not a promise

The results are educational reference points, not a guarantee. The tool ignores real taxation, return variability, sequence risk and changing expenses. Its value is not the exact figure but the shape of the curve: it reminds you that the feasibility of an investment-income plan turns first on how prudent your return assumption is.

The sustainable withdrawal rate isn’t a constant — it depends on the real-return regime in which the capital is deployed. To contextualize it: current macro regime →

Key takeaways

• The capital required hinges almost entirely on the assumed real return.
• To preserve capital, withdrawals stay below the real return — inflation is the decisive filter.
• The 4% rule consumes capital over 30 years: a different logic, less demanding in capital.
• A prudent assumption avoids overstating how sustainable an investment-income plan is.

Last updated — 28 May 2026