Reading a pension statement backwards
A pension statement says £340,000 and offers no translation. Is that a lot? What would it actually pay, month by month, if the salary stopped? Most retirement maths runs the other way, from spending to required pot, which is the right direction when you are planning and is what the FIRE calculator does. This page runs the arithmetic in reverse: pot in, monthly income out.
The calculation is a single step, your pot multiplied by the withdrawal rate, divided by twelve. A £500,000 pot at 4% is £20,000 a year, or about £1,667 a month before tax. That is the whole formula. The interesting part is not the arithmetic but the withdrawal rate, which is a judgement rather than a fact, and the page shows your chosen rate as the headline with 3.5% and 5% alongside it. Those two are not decoration. They exist to show how wide the reasonable range is, and how much of your answer depends on an assumption you chose rather than on the size of your pot.
Where 4% came from, and where it stops
The 4% figure comes from the Trinity Study, which tested US portfolios over rolling 30-year historical periods and found that 4% of the starting balance, increased annually with inflation, survived almost all of them. That result is often repeated without its conditions attached. It assumed a 30-year retirement, a specific US stock and bond mix, no fees, and US market history, which was unusually good. Applied to a 45-year early retirement, an internationally diversified portfolio and a 1% platform charge, the same research does not support the same number.
As a planning anchor for a roughly 30-year retirement, 4% remains reasonable: a starting point for discussion rather than a rule. For longer horizons most analysis lands lower. Retirements of 40+ years sit more safely at a conservative 3% to 3.25%, early retirees commonly compromise at 3.5%, and anything at 5% or above requires either flexibility to cut spending, other income arriving later, or a willingness to accept a real chance of running short. The safe withdrawal rate tool goes into how these figures were derived and where they break down.
Whichever rate you pick, remember what shape of thing this page is: a static snapshot, not a plan. It takes a constant percentage of the original pot, ignores what markets do afterwards, and cannot tell you whether the money lasts. A pot drawn at 4% through a bad first decade behaves very differently from the same pot drawn through a good one; that is sequence risk, the single largest danger in drawdown, and the retirement crash test and the Monte Carlo simulator exist to model it. Real retirees do not follow a fixed percentage anyway. They spend less after a bad year and more after a good one, and strategies that flex, covered in withdrawal strategies, generally support a higher starting rate than a rigid rule does. Note also that the classic rule assumes you increase withdrawals annually to keep pace with inflation; this page shows the starting figure, in today's money, and nothing here accounts for inflation unless you supply a real rate. A monthly income that stays fixed loses purchasing power every year it stays fixed.
The gap between gross and spendable
The figure this page produces is gross. What reaches your bank account depends entirely on where the money is held and which country taxes you. In the UK, drawing from a pension typically gives 25% tax-free with the rest taxed as income; ISA withdrawals are tax-free; a general investment account brings capital gains and dividend tax into play. Two people with identical pots and identical withdrawal rates can end up with materially different spendable incomes purely because of the wrappers involved. So treat the output as the top line, apply your own marginal rates to the taxable portion if you need a spendable figure, and if the numbers are consequential, this is the point at which a qualified adviser earns their fee. The guide to turning a pot into income sets drawdown against an annuity and works through the tax on the way out.
Feed the tool only the part of the pot you intend to draw from. Money earmarked for something else (a property, a bequest, a known future cost) is not producing your income. Neither is money you cannot yet touch: if part of your money is in a pension you cannot yet access, the income it implies is not income you can spend today, which is what the pension bridge calculator untangles. And the pot rarely works alone. State pension, defined benefit schemes, rental income and part-time work all reduce what your pot needs to produce, often substantially, and they usually start at different ages.
Two illusions, punctured
The most useful thing this page does is deflate two opposite beliefs. The first is that a six-figure pot is automatically comfortable: £250,000 sounds substantial and pays roughly £729 a month at 3.5%, which against average household bills is a contribution, not a retirement. The second is that the target is impossible. Working the other way, a £1,500-a-month income needs about £514,000 at 3.5%: a large number, but one that decades of contributions and compounding can plausibly reach. The 25x rule frames the same relationship from the spending side, and the compound interest calculator shows how the pot gets built.