How much is typically spent from an endowment each year?
Because endowments are intended to provide perpetual support for institutions, they might be thought of as a special savings plans for the future. To protect an endowment’s inflation-adjusted value for future generations of students, most universities establish disciplined spending policies (or formulas) to ensure appropriate spending from their endowments each year. While endowment values generally rise and fall with market conditions, most institutions adopt and adhere to spending policies that enable them to generate a steady support for annual operations. This financial stability is crucial to institutions, whose mission-critical activities are chiefly long-term and not easily started and stopped (e.g., the funding of faculty positions or ongoing maintenance and renovation of campus facilities). Over the last decade, the annual spending rates of college and university endowments have averaged between 4.5% and 5.1%. Today, three-quarters of colleges and university apply a spending r
