Retirement Income

The monthly income a retirement pot supports, and how many years it stretches to.

Formula

How the calculation works

A pot turns into income through a withdrawal rate. Apply 4% to 500,000 and the yearly draw is 20,000, or 1,666.67 a month. The years figure is the pot divided by the annual draw, which is the plain arithmetic behind the 4% rule: it is 25 years of income if the pot earns nothing.

Because the pot usually stays invested, the money can outlast that figure, and the page says so rather than implying a guarantee. What the figure does is set the income against the pot in one step, which is the comparison a retirement plan needs.

Common mistakes

• Treating the withdrawal rate as fixed. A bad decade early in retirement can force a lower rate, so the figure is a starting point rather than a rule.
• Reading the years figure as a guarantee of how long the money lasts. It is the pot divided by the draw and ignores any return the pot earns.

When to use it

• Use it to turn a pot you have into the income it supports, which is the first number a retirement plan needs.
• It is also the tool for comparing two pots, or two withdrawal rates, side by side before deciding how much to draw.

Worked example

A 500,000 pot at a 4% withdrawal gives 20,000 a year, 1,666.67 a month, over 25 years.

Common questions

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Last updated: 2026-09-29