The formula
How to calculate withdrawal amount
This is the practical version of the withdrawal question: given a pot and a rate, what actually lands in the current account each month once tax has taken its share?
The effective rate is a blend, not a tax band. Withdrawals split across an ISA (no tax), a pension (25% tax-free, the rest taxed as income) and a taxable account (capital gains with an annual allowance) usually produce an effective rate well below the marginal one.
What to enter:
- Portfolio value
- Withdrawal rate (%)
- Effective tax rate (%) — blended across pension, ISA and taxable withdrawals
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.
Where a figure is not immediately to hand — a precise interest rate, an exact balance — a reasonable estimate is a perfectly good starting point. Because every result updates instantly, refining a rough guess into the real figure once you have it takes a moment, and nothing about the calculation depends on getting it exactly right on the first attempt.
Why withdrawal amount 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.
A calculation like this usually gets used at a decision point rather than out of curiosity — comparing two real options, checking a number a lender or adviser has quoted, or working out whether a plan that sounded fine in conversation still holds up once it is written down with actual figures. The maths itself is rarely complicated; what is hard is remembering which figures to use and in what order, which is exactly what a dedicated calculator is for.
It is also useful as a sense check before signing anything. A quote, an offer letter or a spreadsheet from someone else can contain an error, an optimistic assumption, or simply a different convention for rounding — running the same inputs through an independent calculator is a quick way to confirm a number before relying on it.
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 withdrawal amount 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.
Where the same calculation needs to be run for several different scenarios side by side — three loan offers, two savings plans — the fastest approach is usually to open the calculator in a second browser tab for each one, so that the results can be compared directly rather than overwriting each other in a single set of fields.
Worked example
Work through the defaults on this page:
- Portfolio value: 700,000
- Withdrawal rate: 3.75 %
- Effective tax rate: 15 %
That gives:
- Gross annual withdrawal: 26,250
- Net annual withdrawal: 22,312.5
- Net monthly: 1,859.38
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
The net monthly figure is the one to compare against your budget. Planning against the gross number is how retirees discover a shortfall in the first year.
Where this goes wrong. Forgetting that the first year is the anchor. Under the standard rule the amount rises with inflation each year thereafter and is not recalculated from the new balance, which means a bad first year has permanent effects.
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 £28,000 a year at 4%, or £26,250 at 3.75%, before tax. What arrives net depends heavily on how the money is split between pensions, ISAs and taxable accounts.
Monthly suits cash flow and reduces the chance of selling everything on a bad day; annually reduces transaction costs and admin. The difference to long-run outcomes is small — pick whichever you will actually keep to.
The headline figure is gross annual withdrawal. With 700,000 portfolio value, 3.75 % withdrawal rate and 15 % effective tax rate, that comes to 26,250. 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.