How much monthly income will my savings give?

Spending a nest egg down is a loan in reverse: you lend the money to yourself and pay it back monthly.

Problem

You retire with $800,000, expect to earn 5% a year on it, and want it to last 25 years, withdrawing at the start of each month. How much can you take?

Keystrokes

fFINx≷y
0.00
Start clean.
gBEG7
0.00
Withdrawals at the start of each month.
25g12×n
300.00
300 monthly withdrawals.
5g12÷i
0.42
Monthly rate.
800000CHSPV
−800,000.00
The nest egg, paid into the plan.
PMT
4,657.31
The monthly withdrawal, positive because you receive it.
gEND8
4,657.31
Back to end-of-period payments.

Answer

You can withdraw $4,657.31 a month for 25 years.

Why it works

The nest egg goes in as a negative PV, and the withdrawals come out as a positive PMT. FV stays at zero so the money runs out exactly at the end. For a balance left over, such as an inheritance, store it as a positive FV.

Inflation

This income is level, so it buys less every year. A rough fix is to use a real rate, your expected return minus inflation, in place of 5%.

Questions

Why BEG?

Most people take the first withdrawal when they retire, not a month later. That one month less of growth makes each withdrawal slightly smaller.