What this calculator does
A drawdown works in the opposite direction to a savings plan. The balance still earns a return, but withdrawals reduce it steadily until it reaches zero at the end of the chosen period. This calculator gives the level monthly payment that exhausts the balance exactly on schedule.
The return earned during drawdown does real work. Because the balance stays invested while it is being spent, the total paid out exceeds the starting balance: often by a substantial margin over a long retirement.
The formula
This is the loan payment formula in reverse. Instead of a lender advancing you a sum you repay in instalments, you advance the balance and receive instalments. The mathematics is identical.
| Term | Meaning |
|---|---|
| PV | The starting balance being drawn down. |
| PMT | The level payment received each month. |
| i | Monthly return: annual return ÷ 12 ÷ 100. |
| n | Number of monthly payments. |
The inputs explained
| Field | What to enter |
|---|---|
| Starting balance ($) | The pot available at the start of the drawdown. |
| Annual return while drawing down (%) | The annual return the remaining balance earns while it is being drawn down. This is usually more conservative than an accumulation-phase return. |
| Years of payments | How many years the payments should last. The balance reaches zero at the end. |
When to use it
Planning retirement income
Enter your expected balance at retirement and the years you want it to cover. The monthly payout is what that balance supports on a level basis: before any pension or other income.
Comparing an annuity quote
If an insurer quotes a monthly income for a given premium, run the same premium and term here. The difference is the insurer’s margin plus the value of the longevity guarantee they are providing.
Structuring an inheritance or settlement
Rather than spending a lump sum, work out what it supports as an income over a defined period. The framing changes the decision considerably.
Testing how long money lasts
Adjust the years until the monthly figure matches your required income. That tells you how long the balance realistically covers.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
What $600,000 pays each month
A $600,000 balance earning 4% while being drawn down, across different payout periods.
| Payments last | Monthly payout | Yearly payout | Total paid out | Of which is growth |
|---|---|---|---|---|
| 10 years | $6,074.71 | $72,896.50 | $728,964.99 | $128,964.99 |
| 15 years | $4,438.13 | $53,257.53 | $798,862.96 | $198,862.96 |
| 20 years | $3,635.88 | $43,630.58 | $872,611.67 | $272,611.67 |
| 25 years | $3,167.02 | $38,004.25 | $950,106.31 | $350,106.31 |
| 30 years | $2,864.49 | $34,373.90 | $1,031,217.04 | $431,217.04 |
| 35 years | $2,656.65 | $31,879.78 | $1,115,792.35 | $515,792.35 |
How the return rate changes a 25-year drawdown
Same balance and period, different returns during the drawdown phase.
| Return during drawdown | Monthly payout | Total paid out | Of which is growth |
|---|---|---|---|
| 0% | $2,000.00 | $600,000.00 | $0.00 |
| 2% | $2,543.13 | $762,937.81 | $162,937.81 |
| 4% | $3,167.02 | $950,106.31 | $350,106.31 |
| 6% | $3,865.81 | $1,159,742.52 | $559,742.52 |
| 8% | $4,630.90 | $1,389,269.19 | $789,269.19 |
Different balances over a 25-year retirement
What various retirement balances support as a level monthly income.
| Starting balance | Monthly payout | Yearly payout | Total paid out |
|---|---|---|---|
| $250,000 | $1,319.59 | $15,835.11 | $395,877.63 |
| $500,000 | $2,639.18 | $31,670.21 | $791,755.26 |
| $750,000 | $3,958.78 | $47,505.32 | $1,187,632.89 |
| $1,000,000 | $5,278.37 | $63,340.42 | $1,583,510.52 |
| $1,500,000 | $7,917.55 | $95,010.63 | $2,375,265.78 |
Questions
Does the balance run out at the end?
Yes. The payment is calculated so the balance reaches exactly zero after the final payment. If you want to preserve capital, use only the return each year rather than a drawdown schedule.
Does this account for inflation?
No: the payment is level in nominal terms, so its purchasing power falls over time. To approximate an inflation-adjusted income, use a real return: subtract expected inflation from the return rate before entering it.
What return should I use during drawdown?
Usually lower than during accumulation, since portfolios are typically made more conservative once income is being drawn. Being cautious here is prudent, because running out early is a far worse error than finishing with a surplus.
What is sequence-of-returns risk?
A poor run of returns early in the drawdown does more damage than the same run later, because withdrawals are taken from an already-reduced balance. A level-return calculation like this cannot capture that, so treat the result as a central estimate rather than a guarantee.
For the accumulation phase leading up to this, see the retirement projection or the compound interest calculator.