Do you know how long your pension could last in drawdown?
Our free drawdown calculator helps you estimate how long your pension savings could last if you take an income from your pension while keeping the remaining money invested.
Enter your pension pot, your planned annual income, your age and other details. The calculator then estimates how your pension could change over time and how long your money could last.
This can help you answer an important question: will my pension provide the income I need throughout retirement?
The result is an illustration rather than a guarantee. Investment returns, inflation, the amount you withdraw and how long you live can all affect how long your pension lasts.
What is pension drawdown?
Pension drawdown allows you to take an income from your pension while leaving the remaining money invested. Unlike an annuity, which can provide a guaranteed income for life, drawdown gives you more flexibility over how much you take and when you take it. However, your pension remains exposed to investment performance, and taking too much income can cause your savings to run out sooner than expected.
This makes the level of income you withdraw an important part of your retirement planning.
How much can I withdraw from my pension?
There is no single withdrawal rate that is suitable for everyone. The amount you can afford to withdraw depends on the size of your pension, your other sources of income, your spending needs, your investments, and how long your retirement may last.
Taking a higher amount may give you more money to spend now, but it can also reduce the amount remaining in your pension and increase the risk of running out of money later.
A lower withdrawal rate may help your pension last longer, but may mean you have less income available immediately.
This is why it can be useful to model different withdrawal levels rather than choosing an amount based on a general rule.
What happens if I withdraw too much?
Taking too much from your pension can reduce the amount available later in retirement.
There is also a risk known as sequence of returns risk. If your investments fall in value early in retirement while you are also taking withdrawals, your pension may have less opportunity to recover.
For example, two people could have the same pension pot and take the same income, but experience very different outcomes depending on how their investments perform during retirement.
This is why your withdrawal strategy and investment approach can both be important when using pension drawdown.
What if my pension is not going to last?
If the calculator suggests that your pension may run out before your chosen age, there are several factors you could consider.
For example, you could explore:
- reducing the income you take from your pension
- delaying retirement or taking a lower income initially
- using other savings or investments alongside your pension
- considering other sources of retirement income, including the State Pension
- reviewing your pension investments and charges
- considering whether an annuity could provide some or all of your retirement income
The right approach depends on your circumstances. A calculator can highlight a potential problem, but it cannot determine which option is right for you.
Should I speak to a financial adviser about pension drawdown?
A drawdown calculator can be a useful starting point, but it cannot consider every aspect of your financial circumstances. Choosing how to take income from your pension involves decisions about investment risk, tax, income needs and how long your money may need to last.
A regulated financial adviser can help you assess your wider position and consider how pension drawdown fits alongside your other savings, investments and sources of income.
If you would like help deciding how to approach pension drawdown, you can use the Trusted Advisor adviser matching service to find a regulated financial adviser suited to your needs. Alternatively, email our team at hello@trusted-advisor.co.uk and we can help you understand the next steps.