Turning a pot into an income calculator
The sustainable draw, and how much one point of return moves it.
Interactive: turning a pot into an incomeEasy
A level real payment drawn from a pot over a fixed horizon, and the pot a target income requires. Deterministic arithmetic on constant returns — which is the honest simplification and the one to be aware of.
- Sustainable income
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- As a share of the pot
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- If it must last forever
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- Pot needed for the target
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- If the real return is 1% different
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- What this ignores
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The sensitivity band is the point of the tool. One percentage point of real return moves the sustainable income by a large fraction, which means the whole answer rests on an assumption nobody can pin down. And constant returns hide sequence risk entirely: the same average return arriving in a different order produces a very different outcome once money is being withdrawn — see the arithmetic of drawdowns. Nothing here is a recommendation about withdrawal rates.
The idea behind it
This calculator belongs to Diversification & Correlation, where the mechanism it computes is explained step by step, with the formula, what each input means and where the simple model stops being right. Everything is computed in your browser; nothing you type is sent anywhere.
Instruments it applies to
- Annuity — The only product that pays until you die. You are not buying a return — you are buying insurance against outliving your money, and the price is your capital.
More calculators from Diversification & Correlation
- Two-asset portfolio volatility — the diversification benefit, live.
- Kelly criterion — the growth-optimal stake, and why to bet less.
- How many holdings is enough? — the diversification curve and the floor it cannot pass.