Retirement Income Calculator
Last updated: 27 June 2026
Reviewed by Gavin Meiring, Lead research and primary author · Doctoral Candidate (Corporate Governance) · Research and drafting assisted by AI
- The 4% rule — the most famous retirement number in the world — came from William Bengen's 1994 paper, which tested every 30-year period in US market history and found that 4% (adjusted for inflation) never ran out of money.
- A handy shortcut falls out of the rule: to retire at a 4% withdrawal rate you need roughly 25 times your annual spending saved up — the '25× rule' that anchors most retirement calculators.
- The rule assumes a 30-year retirement and a balanced stock-bond portfolio — stretch either and it breaks: longer retirements and higher fees both push the sustainable rate down.
Retirement Income Calculator
A retirement income calculator translates your pension pot, investments, and other income sources into an estimated annual and monthly income in retirement. It is used by people approaching or planning for retirement who want to understand what their accumulated savings can realistically deliver.
How to Use the Retirement Income Calculator
- Enter the total value of your pension pot and other investment savings at your expected retirement date.
- Enter any guaranteed income sources such as the State Pension, defined benefit pension, or annuity income.
- Enter your planned retirement age, life expectancy, and expected annual investment return in drawdown.
- Optionally enter an inflation rate to see real purchasing power over time.
- The calculator shows your total annual income, how long the pot lasts at different withdrawal rates, and the impact of inflation on future income in real terms.
The Formula
Sustainable Annual Withdrawal = Portfolio Value x Withdrawal Rate
Where the withdrawal rate is the percentage taken from the portfolio each year. The 4% rule is a widely used starting point, derived from research showing that a 4% initial withdrawal rate (adjusted annually for inflation) has historically sustained a balanced portfolio for at least 30 years.
For a more precise calculation: Annual Income = Guaranteed Income + Portfolio Withdrawal
Total Annual Income = State Pension + Defined Benefit Pension + (Pension Pot x Withdrawal Rate)
Real-World Example
You retire at 65 with a pension pot of £350,000. Your State Pension is £11,500 per year. You use a 3.5% withdrawal rate to be conservative.
Annual portfolio withdrawal = £350,000 x 0.035 = £12,250.
Total annual retirement income = £11,500 + £12,250 = £23,750 per year.
Monthly income = £23,750 / 12 = £1,979 per month.
If you wanted £30,000 per year in total and have £11,500 from the State Pension, you need £18,500 from your portfolio. At 3.5% withdrawal, this requires a pot of £18,500 / 0.035 = £528,571. This reverse calculation tells you how large a pot you need to hit an income target.
Annuity vs Drawdown: Choosing How to Take Income
There are two main approaches to converting a pension pot into income. An annuity purchases a guaranteed income for life from an insurance company, eliminating longevity and investment risk. Rates depend on your age, health, and prevailing interest rates. Flexi-access drawdown keeps your money invested and allows flexible withdrawals, but requires ongoing management and exposes you to sequence-of-returns risk. Many retirees use a hybrid approach: using part of the pot to buy an annuity that covers essential expenses, while keeping the remainder in drawdown for discretionary spending and legacy purposes. The right balance depends on your health, financial resilience, risk tolerance, and whether you have dependants.
Frequently Asked Questions
How much income can I take from my pension tax free? Under current UK rules, you can take up to 25% of your pension pot as a tax-free lump sum (up to a maximum amount). The remaining 75% is taxed as income when withdrawn. Spreading withdrawals across tax years can minimise the tax you pay.
What is a safe withdrawal rate? The conventional benchmark is 4%, based on US historical data. UK-focused research suggests 3.5% may be more appropriate given different market conditions. Your safe withdrawal rate depends on asset allocation, flexibility of spending, and how long you need the money to last.
Will my income keep up with inflation? The State Pension increases annually by the triple lock: the highest of wage growth, inflation, or 2.5%. Drawdown income does not automatically increase, so you need to plan for rising costs by either increasing withdrawals or holding inflation-linked assets within your portfolio.
What happens if I live longer than expected? Longevity risk is one of the biggest risks in retirement planning. Building in a buffer by using a conservative withdrawal rate, holding a diversified portfolio, and maintaining some flexibility in spending allows you to adjust if you live longer than the base plan assumed.
From a pot to an income, in reverse
Most people arrive at this calculator with a pot and want to know the income. The more useful question is often the other way round, and the reverse sum is a single division once the guaranteed income is stripped out.
The planned income, less the State Pension, is the share the portfolio has to cover. Divide that share by the withdrawal rate to get the pot it needs.
| Target annual income | Portfolio share | Pot needed at 3% | At 3.5% | At 4% | At 4.5% |
|---|---|---|---|---|---|
| £20,000 | £8,500 | £283,333 | £242,857 | £212,500 | £188,889 |
| £25,000 | £13,500 | £450,000 | £385,714 | £337,500 | £300,000 |
| £30,000 | £18,500 | £616,667 | £528,571 | £462,500 | £411,111 |
| £35,000 | £23,500 | £783,333 | £671,429 | £587,500 | £522,222 |
| £40,000 | £28,500 | £950,000 | £814,286 | £712,500 | £633,333 |
Half a percentage point of withdrawal rate is worth a lot of pot. Moving a £30,000 target from a 4% withdrawal to a 3.5% withdrawal adds £66,071 to the pot required, and moving it to 3% adds £154,167 against the 4% figure. The withdrawal rate is doing more work in this table than the income target is, which is why the argument about whether 4% is safe matters so much.
Withdrawal rate against income, for life
The same £350,000 pot produces a different income at every withdrawal rate, and the guaranteed income sits on top.
| Withdrawal rate | Income from the pot | Plus the State Pension | Total a year | A month |
|---|---|---|---|---|
| 3.0% | £10,500 | £11,500 | £22,000 | £1,833.33 |
| 3.5% | £12,250 | £11,500 | £23,750 | £1,979.17 |
| 4.0% | £14,000 | £11,500 | £25,500 | £2,125.00 |
| 4.5% | £15,750 | £11,500 | £27,250 | £2,270.83 |
| 5.0% | £17,500 | £11,500 | £29,000 | £2,416.67 |
A withdrawal rate is a choice with a consequence, and the consequence is how long the pot lasts. £12,250 a year out of £350,000 is a 3.5% withdrawal, and the break-even return is exactly 3.5%: below that the pot shrinks, and at 3.5% or above it holds. The table below shows the years of income from the same pot at the 3.5% withdrawal, against different returns in drawdown.
| Return in drawdown | Years of £12,250 a year from £350,000 |
|---|---|
| 0% | 28.6 years |
| 2% | 42.8 years |
| 3% | 65.8 years |
| 3.5% and above | the pot does not deplete |
The 3.5% rate is doing exactly what the projection asks of it. It produces a pot that survives a zero-return world for almost 29 years, and one that survives any return at or above 3.5% indefinitely. Push the withdrawal to 5% and the same pot has to earn 5% to stand still, which is a much harder ask over three decades.
The tax-free lump sum and the rest of the pot
Taking the lump sum is a trade rather than a perk. Under the current UK rules up to 25% of a pension pot can be taken tax free, and the rest is taxed as income when it is withdrawn. On a £350,000 pot the tax-free amount is £87,500, leaving £262,500 invested.
| Route | Pot invested | Income at 3.5% | Plus the State Pension | Total a year |
|---|---|---|---|---|
| No lump sum taken | £350,000 | £12,250 | £11,500 | £23,750 |
| £87,500 taken tax free | £262,500 | £9,188 | £11,500 | £20,688 |
Taking the whole lump sum costs £3,063 a year of income, and at that rate it takes 28.6 years of drawing the larger income to recover the £87,500 given up. For a retiree at 65 with a 25-year horizon, the arithmetic is finely balanced; for one who lives to 95, the income route wins. The case for taking the lump sum rests on what it is used for. Clearing a mortgage, clearing expensive debt or funding something that would otherwise be borrowed at a higher rate than the pot earns all change the sum, and putting it in a savings account does not.
On the current State Pension rate the two routes give £24,798 against £21,735 a year rather than £23,750 against £20,688, because the guaranteed income is larger. The gap between the routes is the same £3,063 either way, since it comes from the pot rather than from the State Pension.
Assumptions this estimate rests on
Five assumptions hold the whole table together, and each one has a way of failing. The withdrawal rate is assumed to stay constant in real terms, which means it rises in cash terms each year if you want the same purchasing power, and the tables above are in today's money. The State Pension is assumed to keep its value, which it has done through the triple lock, rising by the highest of earnings growth, CPI inflation or 2.5% each year. The return in drawdown is assumed to arrive evenly, which is the assumption that ages worst: the same average return delivered in a different order produces a different outcome, and a bad first five years does more damage to a 3.5% plan than a bad final five.
The pot value is assumed to be the figure at retirement with all charges already taken, and the income figures are before tax on the pension withdrawals. That last point matters more than it looks. A £23,750 income built from £12,250 of pension withdrawals and £11,500 of State Pension is not taxed the same way as the same total built from a larger pension and no State Pension, because the State Pension is taxable income but is paid gross.
The State Pension rate this page uses
The State Pension figures on this page are the ones the calculation uses, and the rate changes every April. GOV.UK's published rates for 2026 to 2027 put the full rate of new State Pension at £241.30 a week, which is £12,547.60 a year, for someone with 35 qualifying years of National Insurance. The rate for 2026 to 2027 is up from £230.25 a week in 2025 to 2026, which was itself up from £221.20 a week in 2024 to 2025.
The £11,500 used in the worked example above is the 2024 to 2025 rate. The full rate that year was £221.20 a week, which over 52 weeks is £11,502.40, and the example rounds it down to £11,500. Substituting the current rate leaves the method untouched and lifts the example's total income from £23,750 to £24,798 a year. Anyone planning on these figures should use their own forecast from the check your State Pension service rather than any published full rate, because the amount paid depends on the individual National Insurance record.
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