The question the accumulation phase leaves open
Building a pot and spending one down are different pieces of arithmetic. The Annuity Calculator on this site covers phase one, the years a premium and any contributions spend growing. This page picks up once a pot exists, when the question turns from "how big will it get" to "how much can I safely take out of it, and for how long". The two tabs answer that both ways, on the same relationship between a balance, a growth rate and a monthly cash flow.
How much income a pot supports
A pot paying a level monthly income while what remains keeps earning a return is the same maths as a loan being paid off, just reversed: instead of a lender's balance shrinking to zero as you repay it, your own balance shrinks to zero as it pays you. The standard amortising-payment formula, solved for the payment, gives the level monthly income M a pot P supports over n months at monthly growth rate r:
Worked example, the calculator's own defaults: a $300,000 pot, growing at 5% a year, paying out over 25 years, supports $1,753.77 a month, $526,131 withdrawn in total, of which $300,000 is the original pot and $226,131 is growth; the balance reaches exactly zero on the final month. At 0% growth the formula collapses to plain division: the same pot over 25 years pays exactly $1,000 a month with nothing left to compound. Term and rate pull in opposite directions here: stretching that pot from 25 to 35 years at 5% drops the income to $1,514.06 a month, while raising the rate from 0% to 9% at a fixed 25 years lifts it from $1,000 to $2,517.59, since a higher return does more of the work.
The perpetuity row: never touching the principal
There is an older way to draw an income from a pot: take out only what it earns, and leave the principal alone forever. That figure is a perpetuity, and it needs no term, because a fixed principal earning a fixed rate and paying out exactly that rate never runs down: perpetuity income = P × annual growth rate ÷ 12. On the calculator's defaults, the same $300,000 pot at 5% pays $1,250 a month forever, against $1,753.77 a month for 25 years and then nothing. That $503.77 gap is the price of spending the pot down rather than only skimming its growth: a finite payout always affords more per month, since it hands back the principal itself as well as the growth. Neither answer is more correct; the results panel shows both so the trade-off is visible rather than assumed.
How long will it last, run the other way
The second tab keeps the pot and growth rate but fixes the monthly withdrawal instead of the term, then asks how many months the pot survives. Rearranging the same relationship for the term needs a logarithm rather than a plain division:
Worked example: the same $300,000 pot at 5%, drawing $2,000 a month, lasts 235.9 months, just under 19 years and 8 months. Drawing $1,200 a month instead never runs out: $1,200 sits below the $1,250 the pot earns every month at 5%, so the balance holds steady or keeps growing, and the calculator says so plainly rather than implying an ending that never comes. That indefinite case is the mirror of the perpetuity row on the first tab, the same boundary approached from the opposite direction. At 0% growth the logarithm is not needed either: months until exhausted is just pot divided by withdrawal.
A pure sum, not an insurance contract
Nothing on this page is a quote, and nothing here buys a guarantee. A real annuity is a contract with an insurer: hand over a pot, and the insurer promises an income for as long as you live, however long that turns out to be, by pooling that risk across everyone who buys one and pricing in what actuaries call mortality credits, the extra return survivors receive from others in the pool who do not live as long. This calculator does none of that; it simply divides a fixed pot by a fixed term and growth rate, and says nothing about how long any individual person will live. Match the term to how long you happen to live and this maths looks similar to a real annuity's payout; live longer, and this calculator's pot runs out while a genuine life annuity's income does not. That difference, not the arithmetic, is what an insurer actually sells.
The 4% rule, named and hedged
A common rule of thumb for retirement withdrawals is to take 4% of a pot in the first year and adjust that amount for inflation every year after, a figure tracing back to financial planner William Bengen's 1994 study in the Journal of Financial Planning, tested further by the Trinity study of 1998, which ran various withdrawal rates against rolling historical periods of real US stock and bond returns. On the calculator's own $300,000 default, 4% works out to $1,000 a month, the same figure this calculator happens to produce for a 25-year payout at a flat 0% growth rate, a coincidence of these particular defaults rather than a rule.
The two figures answer different questions. Bengen's rule, and the studies that followed it, model a real historical sequence of up-and-down annual market returns over a rolling 30-year retirement, with the withdrawal rising with inflation every year. This calculator assumes one constant growth rate applied evenly across every month, with a flat, non-inflating withdrawal, a clean way to see what a steady rate implies but not a substitute for that historical modelling, and the rule itself remains debated: a rate calibrated on one country's market history need not hold for lower-return decades or other markets.
Sequence-of-returns risk, briefly
A single steady growth rate hides something a real, varying sequence of returns cannot: when the good and bad years fall matters as much as their average. Take three annual returns, +20%, +5% and −15%, averaging 3.33%, applied to a $300,000 pot with $20,000 drawn at the end of each year. Run them in that order and the pot ends at $266,450; reverse the order, −15% first, same average, same total withdrawn, and it ends at just $252,100. Only the order changed, yet the outcome moved by over $14,000, because a withdrawal taken from a pot that has just fallen never gets the chance to grow back. This calculator's constant rate cannot show that risk, since every year behaves identically by construction; it is a real feature of drawing an income from a pot, not something this page's arithmetic models.
Drawdown or annuitise: the choice at retirement
The UK and US frame this choice differently. Since the UK's 2015 pension freedoms, most people can leave a pension invested and draw an income as needed, commonly called drawdown, or exchange some or all of it for a guaranteed annuity income, with no requirement to pick either exclusively. In the US, retirement accounts default to drawdown in practice, subject to required minimum distributions from a certain age, while annuities are bought separately by anyone wanting the guarantee. This calculator's first tab is closer to what a drawdown plan looks like on paper; a real annuity is priced using life expectancy tables and pooled mortality risk no plain arithmetic tool can reproduce. Rules and tax treatment vary by provider, so treat this as the general shape of the choice rather than advice on any specific pot.
Choosing your numbers and reading the results
The pot is whatever lump sum is actually available to draw from, after any tax-free portion has already been taken. The growth rate should reflect what the balance is realistically invested in while it pays out, cash and bonds lower, a diversified portfolio higher, and it is worth testing a lower figure alongside your best guess. On the first tab, payout years is a planning choice as much as a maths input: pick a number that comfortably outlasts a typical life expectancy if running out is the risk you most want to avoid, and compare the result against the perpetuity row to see what that safety margin costs. On the second tab, the withdrawal is whatever you actually plan to take out; an indefinite result means the pot's own growth already covers it. Both charts plot the same kind of curve, principal falling as withdrawals outpace growth. For the plain time-value-of-money formulas this maths is built from, stripped of retirement framing, the Present Value Calculator runs the textbook version of the same discounting arithmetic.
Questions people ask
Is this the same number an insurance company would quote me for an annuity?
No. This is a fixed-term or fixed-withdrawal arithmetic exercise assuming one constant growth rate. A real annuity's income is priced using life expectancy tables and pooled mortality risk across everyone who buys one, factors this calculator has no way to include. Treat this as the maths behind drawing down a pot yourself, not a quote.
What does "lasts indefinitely" actually mean?
It means the monthly withdrawal you entered is at or below what the pot earns every month at the growth rate you set. Since the balance is not falling on average, there is no month at which it reaches zero, so no number of months to report; the pot holds steady or keeps growing instead.
Why does the perpetuity row pay less than the fixed-term one?
Because a perpetuity never spends the principal, only the growth on top of it, while a fixed-term payout is built to reach exactly zero at the end, so it can afford to hand back some of the principal itself every month as well. Spending the pot down always affords a higher monthly figure than only skimming its growth, at the cost of the pot eventually running out.
Is the 4% rule the same as what this calculator works out?
Related but not identical. The 4% rule comes from historical studies of real, varying market returns over rolling 30-year periods, with the withdrawal rising each year with inflation. This calculator uses one constant growth rate and a flat, non-inflating withdrawal, which makes it a clean illustration of steady-rate arithmetic rather than a rebuild of that historical modelling.
Does this calculator account for tax on the income?
No. Every figure here is the arithmetic on the pot itself, before any tax that may apply to withdrawals under your own country's or account's rules. Take-home income can be meaningfully lower once tax is applied, so check that separately.
What happens if I enter a pot of zero?
There is nothing to draw an income from, so the monthly figure comes back as zero on both tabs, and a note explains why rather than the page pretending there is a meaningful answer.
This calculator illustrates pure drawdown arithmetic using a constant assumed growth rate; it is not a life annuity quote, not tax advice, and not a substitute for the historical modelling behind rules of thumb like the 4% rule. Real withdrawal plans should account for sequence-of-returns risk, tax, and life expectancy. Speak to a regulated financial adviser before drawing down a real retirement pot.