Endowment Spending Calculator

Annual Distribution is calculated directly from Endowment Balance and Spending Rate only -- it represents what the endowment spends this year based on its current value, not a forecast of investment performance. Expected Return instead shapes Net Growth Rate and the long-term projections (Balance in 10 Years, Years to Depletion), which describe whether that spending level is sustainable, not what gets spent today.

It appears whenever Net Growth Rate (Expected Return minus Spending Rate) is zero or positive, meaning the endowment's return is projected to keep pace with or exceed its spending, so the balance never mathematically reaches zero under this simplified model. Treat it as a statement about current assumptions, not a permanent guarantee -- a later drop in Expected Return or rise in Spending Rate can turn a sustainable projection into a finite one.

Real Return is Expected Return minus Inflation Rate -- it tells you whether the portfolio is growing faster than the general cost of living. Net Growth Rate is Expected Return minus Spending Rate -- it tells you whether the endowment is growing faster than it is being drawn down. An endowment can have a healthy Real Return while still depleting if Spending Rate is too high relative to Expected Return, or vice versa.

A spending rate in that range has historically tended to let a diversified endowment portfolio's long-run returns keep pace with both spending and inflation, preserving the fund's real purchasing power across market cycles rather than just its nominal dollar balance. It is a widely used guideline, not a guarantee -- this calculator's own Years to Depletion output shows that the same rate can look sustainable or unsustainable depending entirely on the Expected Return you assume.

No -- Annual Distribution only depends on Endowment Balance and Spending Rate. Inflation Rate instead affects Real Return and Real Distribution Yr 10, which show how much purchasing power that same dollar distribution retains after inflation erodes it over time. A distribution that looks flat or growing in nominal dollars can still be shrinking in real terms if Inflation Rate is high.