Pension Calculator - Monthly Payment | Financial Calculator

Free pension calculator to estimate monthly or annual payouts from your retirement fund. Supports principal preservation mode and variable return rates.

Turning a lump sum into income

The pension calculator answers the decumulation question: given what you have saved, how much can it pay out every month? In drawdown mode the fund keeps earning your assumed return while level payments consume it, landing at zero exactly when the chosen period ends. In Preserve Principal mode the payment is simply assets × monthly rate, so only earnings are spent. All results are pre-tax.

Worked example at a hypothetical return

A $300,000 fund earning 3% annually over a 20-year payout period supports $1,663.79 per month — $19,965 in the annual view — before tax. The same fund in Preserve Principal mode pays $750.00 monthly ($300,000 × 0.25% monthly rate) while the balance never declines. Comparing the two against your fixed expenses is a useful framing exercise; the figures are informational, not advice.

How to Use

  1. Total Assets — Enter the current value of the fund you will draw from, for example $500,000
  2. Annual Return Rate — Enter the expected average annual return (%) the remaining balance earns during the payout phase
  3. Withdrawal Period — Enter how long payouts should run, in years or months — 25 years equals 300 monthly payments
  4. Preserve Principal — Check this to receive interest only, keeping the original capital permanently intact
  5. Calculate — Click Calculate to see the sustainable payout for your inputs
  6. Switch the View — Use the monthly/annual radio buttons — the annual figure is simply twelve monthly payouts

FAQ

Is the pension payout subject to tax?

This calculator shows pre-tax amounts. Actual tax treatment varies by product type. Personal pension accounts may be subject to income tax on withdrawals.

How does the Preserve Principal option work?

Only interest earnings are withdrawn while the principal remains intact permanently — ideal for long-term wealth preservation in retirement.

What annual return rate should I use?

For conservative portfolios (bonds/savings), use 1–3%. For balanced stock-bond portfolios, 4–6% is typical. Consider subtracting inflation to get your real return.

What formula converts assets into a monthly payout?

The annuity payout formula: payment = P × r(1+r)^n ÷ ((1+r)^n − 1), where P is your assets, r the monthly rate (annual ÷ 12), and n the number of months. It is the same mathematics as a fixed-rate loan payment, applied to your savings instead of a debt.

How do the two modes compare for the same fund?

With $500,000 at a hypothetical 4% over 25 years, the drawdown mode pays $2,639.18 per month and exhausts the fund at the end; Preserve Principal pays the monthly interest of $1,666.67 indefinitely. The gap is the price of keeping the capital.

Does the payout change over time?

No — the model produces one level payment for the whole period, assuming a constant return. Real pension products may index payments to inflation or adjust with market returns, so use the result as a baseline scenario.