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.
The order the fields are filled in makes no difference to the result — the calculator recomputes the whole formula from whatever is currently in every field, not step by step. That means it is safe to adjust one number, watch the result change, and adjust it back, without worrying about resetting anything first.
Why retirement income matters
FIRE stands for Financial Independence, Retire Early — reaching a portfolio large enough that investment income covers your living costs, so paid work becomes a choice rather than a necessity. It is not a specific account or product, just the point at which the figures below cross over.
Most people who look up a retirement income calculation already have a specific number in mind — a quote, an offer, a target — and want to check it rather than learn the theory behind it. This page is built for that: enter your own figures, see the result immediately, and change any field to see how the answer moves without redoing the arithmetic from scratch each time.
Beyond a one-off check, the same calculation is worth revisiting whenever the underlying numbers change — a new interest rate, a change in income, a different term. Because the figures live in the page's own web address, coming back to update just one field and compare the new result against the old one takes seconds rather than starting again from a blank page.
It is also worth being clear about what a single figure like this can and cannot settle on its own. It answers the specific question the formula was built to answer, and nothing more — a favourable retirement income result does not automatically mean a decision is a good one overall, since plenty of other factors that a formula cannot capture, from personal circumstances to how comfortable a commitment feels, usually matter just as much as the arithmetic. Use the number as one solid input among several rather than the whole of the decision.
In practice, most people arrive at a page like this one having already tried a version of the calculation by hand or in a spreadsheet, and use the calculator here to confirm it rather than replace it. That is a reasonable way to use it — the two should agree to the last decimal place if the same inputs and the same formula are used, and if they do not, the formula shown above is the one to check your own working against first.
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
These figures are only the calculator's own starting values, included so the working is visible rather than hidden inside the tool above. Replace them with your own numbers and the same arithmetic applies — nothing about the method changes, only the inputs feeding it.
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.
A useful check on any unfamiliar result is to compare it against a rough mental estimate first — round the inputs to convenient numbers and see whether the calculator's answer lands in roughly the same territory. A wildly different figure usually means one of the fields was entered in the wrong unit, most often a percentage typed as a whole number where a decimal was expected, or the reverse.
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.
Whenever one of the underlying figures changes — a new interest rate, a different balance, an updated term — since the result only reflects what is currently in the fields. There is no need to keep a separate record of past results; the web address for a filled-in version already carries the figures used to produce it.
Not unless a tax rate or a fee is explicitly one of the inputs above. Where it is not, the figure shown is a gross calculation, and any tax due depends on your personal circumstances and current tax rules, which are worth checking separately.
The arithmetic itself is exact — the calculator applies the formula shown above precisely, with no rounding until the final figure is displayed. The uncertainty, where it exists, is entirely in the inputs: an estimated rate or an approximate balance carries that same approximation through to the result.