The formula
How to calculate portfolio needed
Working backwards from the income you want gives the portfolio you need. This version subtracts fees from the withdrawal rate, because charges are paid out of exactly the returns that fund your spending.
A 0.4% total cost against a 4% withdrawal rate is a tenth of your income, not a rounding error. Expressing it as a reduced net withdrawal rate is the honest way to see what it costs in capital.
The inputs, one by one:
- Monthly income wanted
- Withdrawal rate (%)
- Annual platform and fund fees (%)
Everything recalculates as you type, and the numbers in the address bar update with it, so a link to this page carries your figures with it.
Worked example
Work through the defaults on this page:
- Monthly income wanted: 3,000
- Withdrawal rate: 4 %
- Annual platform and fund fees: 0.4 %
That gives:
- Portfolio needed: 1,000,000
- Portfolio needed if fees were zero: 900,000
- Extra capital the fees require: 100,000
Reading the result
The fee line is the point of this page. Cutting total charges from 1.2% to 0.25% on a £3,000-a-month target lowers the portfolio required by well over £200,000 — a larger effect than most people achieve by saving harder.
Where this goes wrong. Counting only the platform fee. The total is platform plus fund OCF plus any advice charge plus trading costs; a "0.25% platform" holding 0.9% funds is costing 1.15%.
Around £900,000 at a clean 4% withdrawal rate, or roughly £1 million once typical fees are taken into account. At a more cautious 3.5% net rate it is closer to £1.16 million.
Over an accumulation phase they compound against you, and in retirement they come directly out of the sustainable withdrawal. One percentage point of annual cost is roughly a quarter of a 4% withdrawal rate.
The answer it gives you is portfolio needed. With 3,000 monthly income wanted, 4 % withdrawal rate and 0.4 % annual platform and fund fees, that comes to 1,000,000. Change any field and the figure moves with it.