How to use this calculator
- Enter or choose work out.
- Enter or choose starting balance.
- Enter or choose interest rate (per year).
- Enter or choose paid.
- Enter or choose each payout made at.
- The payout per period updates as you type. Use Copy result or Share to keep it.
Method
Payout = B × i ÷ (1 − (1 + i)^−n), divided by (1 + i) when paid at the start of each period; How long: n = −ln(1 − B × i ÷ Payout) ÷ ln(1 + i) (end of period)
- B
- starting balance
- i
- annual rate ÷ payouts per year
- n
- number of payouts
Worked example
- i = 6% ÷ 12 = 0.5%; n = 20 × 12 = 240.
- Payout = 100,000 × 0.005 ÷ (1 − 1.005^−240) = 716.43 a month.
- Total paid = 716.4311 × 240 = 171,943.45, of which 71,943.45 is interest.
$100,000 earning 6% can pay $716.43 a month for 20 years, $171,943 in total.
What the result means
The result is the level income that exactly uses up the balance. Withdrawing less leaves something over; withdrawing more runs the money out sooner. With investments rather than a fixed-rate account, returns vary, so keep a margin and recheck each year.
Assumptions and limits
- The interest rate is fixed for the whole payout period.
- Payouts are level; there is no inflation increase.
- A life annuity from an insurer pays for life, not for a fixed period, and is priced on life expectancy and fees.
- Taxes on withdrawals are not included.
Questions
How long will my money last if I withdraw a set amount?
Choose “How long it lasts” and enter the payout. If the payout is no more than the interest the balance earns, the money never runs out and the calculator tells you so.
Is this the same as the 4% rule?
No. The 4% rule is a rule of thumb for variable stock-and-bond portfolios with inflation increases. This calculator assumes a fixed return and level payments.
Please note: Returns are illustrations at a constant rate, not predictions or guarantees. Investments can lose value. This is not investment advice.