The formula
How to calculate retirement income
This turns a pot into an income. Multiply the portfolio by a sustainable withdrawal rate, add anything guaranteed, and you have the annual figure the retirement has to work within.
The withdrawal rate is the whole argument. 4% is the well-known default for a 30-year horizon; longer retirements and more conservative planners use 3.25–3.5%, and the difference on a £600,000 portfolio is around £4,500 a year.
Fill in the following:
- Retirement portfolio
- Withdrawal rate (%)
- Guaranteed pension income
Results appear immediately — there is nothing to submit. Changing a field rewrites the link, so you can share the exact scenario you are looking at.
Worked example
Here is the calculation with the starting values:
- Retirement portfolio: 600,000
- Withdrawal rate: 4 %
- Guaranteed pension income: 11,500
That gives:
- Total annual income: 35,500
- Monthly income: 2,958.33
- Of which from the portfolio: 24,000
Reading the result
Compare the result against your actual spending rather than a rule of thumb. Two households with the same portfolio can be comfortable and stretched respectively, depending entirely on whether the mortgage is gone.
Where this goes wrong. Ignoring tax. Pension withdrawals above the personal allowance are taxable income; ISA withdrawals are not. Two portfolios of the same size can deliver noticeably different net incomes depending on the wrapper mix.
About £20,000 a year at a 4% withdrawal rate, or £17,500 at 3.5%, before tax and before any state pension. Add the state pension and a typical household total lands near £30,000.
Under the standard rule, yes — the first year is 4% of the balance and each subsequent year rises with prices, which is exactly what the historical testing assumed. That is also why the rate cannot simply be reapplied to a grown balance each year.
It returns total annual income. With 600,000 retirement portfolio, 4 % withdrawal rate and 11,500 guaranteed pension income, that comes to 35,500. Change any field and the figure moves with it.