A million hryvnia sounds like enough to live on for a long time. Here is how long it actually lasts - and why indexing the withdrawals cuts that by more than a third.
The base case
Capital of 1 000 000 ₴, withdrawing 10 000 ₴ a month, the capital earns 8 % a year, inflation runs at 10 % (consumer price inflation per the NBU, October 2026).
If the withdrawal grows with inflation each year so that it keeps its purchasing power, the money lasts 8 years 3 months. You take out 1 426 303 ₴ in total, and the final withdrawal is 21 436 ₴ a month - more than twice where you started.
Turn indexation off and the same million lasts 13 years 10 months - five and a half years longer, from the same return and the same opening withdrawal.
Why indexation costs so much
Without it you keep taking the same 10 000 ₴, which buys less every year. The capital formally survives longer while your standard of living drops annually.
With indexation the withdrawal keeps up with prices, but it compounds just as the capital does. At 10 % inflation against an 8 % return, the portfolio no longer keeps pace with prices: the real return is negative, −1.82 %. Capital with indexed withdrawals then behaves almost like cash in a drawer - a million divided by 120 000 ₴ a year, a little over eight years.
The real value of everything withdrawn, in today's money: 936 870 ₴ with indexation against 916 772 ₴ without - practically the same. Indexation does not deliver more real money; it spreads it differently: a steady standard of living over a shorter term instead of a falling one over a longer term.
Where the balance breaks
Look at the yearly schedule:
| Year | Withdrawn | Capital earned | Left |
|---|---|---|---|
| 1 | 120 000 ₴ | 78 500 ₴ | 958 500 ₴ |
| 5 | 175 692 ₴ | 53 840 ₴ | 606 188 ₴ |
In year one the capital earned 78 500 ₴ against 120 000 ₴ withdrawn - a small gap, so the balance only fell by 41 500 ₴. By year five the withdrawal is 175 692 ₴ and the earnings are just 53 840 ₴, because there is less left to earn on. From there it accelerates: a smaller balance earns less, which drains it faster.
That is why the balance chart is almost flat at first and then drops away.
The withdrawal rate matters more than the sum
10 000 ₴ a month out of a million is 12 % of the capital a year. The classic safe reference is 4 %.
Halve the withdrawal to 5 000 ₴ a month and the same million lasts 15 years 6 months instead of 8 years 3. Doubling the capital to 2 000 000 ₴ while withdrawing 20 000 ₴ changes nothing at all: still 8 years 3 months, because the rate is unchanged.
The term depends on what share of the capital you take out each year, not on its size.
What 25 years requires
Working backwards for 20 000 ₴ a month over 25 years at an 8 % return:
- indexed to 10 % inflation - 6 972 966 ₴
- not indexed - 2 591 290 ₴
A factor of 2.7 between the same plan with and without an allowance for rising prices. Choose that setting deliberately: without indexation you are planning for what is left of today's standard of living in twenty years, not for today's.
The short version
- Indexing withdrawals to inflation cuts the term by more than a third, while the real money it delivers stays about the same - just spread more evenly.
- The withdrawal rate sets the term; the size of the capital does not.
- Capital drains unevenly: barely at first, then quickly.
- The model assumes a steady return - a few bad years early in retirement hurt far more than the same years later on.
Check your own case in the pension calculator - it has both modes: how long it lasts, and how much you need.