How does Harvard determine its endowment payout?

The University’s spending practice must balance two competing goals: the need to fund the operating budget with a stable and predictable distribution, and the obligation to maintain the long-term value of endowment assets after accounting for inflation.

The University determines the annual endowment distribution after considering a variety of factors, including guidance from a payout formula that provides a steady stream of income to support current needs while preserving the endowment’s future purchasing power. This process is similar to those of many other colleges and universities.

Generally, the annual endowment payout rate is 5.0 to 5.5% of market value, though the actual payout rate can vary each year based on endowment returns. For example, following extraordinary endowment returns in FY21 of 33.6% that served to boost the endowment’s market value, the payout rate (i.e., the annual distribution as a percent of market value) fell, despite the fact that the annual distribution increased. Each year the Harvard Corporation approves the final distribution amount