Retirement drawdown mechanics & risks
Drawdown allows your pension capital to remain invested in financial markets while you take periodic income. While your capital has the opportunity to grow, you face investment risk and sequence of returns risk.
If withdrawals exceed portfolio growth during bear markets, capital depletion accelerates, shortening the lifespan of your retirement fund.
Worked example: Drawdown sustainability
A starting pot of $250,000 withdrawing $12,000 annually (4.8% initial rate) increased by 2.5% inflation per year, with 5.0% annual growth and 0.75% fees, is projected to remain funded for over 28 years.
Inputs for the pension drawdown calculator
Capital & Withdrawals
Specify starting balance and year-one target income.
Inflation & Fees
Account for purchasing power erosion and ongoing platform costs.
CALCULATOR QUESTIONS
Pension drawdown calculator questions
What is sequence of returns risk?
Experiencing poor market returns in the first few years of retirement while taking withdrawals severely diminishes portfolio longevity compared to experiencing poor returns later.
Can I combine drawdown with an annuity?
Yes, a hybrid strategy uses an annuity to cover guaranteed basic living expenses and keeps the remainder in drawdown for flexibility and discretionary spending.