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Pension Lump Sum Income Forecast Estimator

The Pension Lump Sum Income Forecast Estimator projects how a pension lump sum may support a stream of withdrawals over time. It combines a starting balance, first-year withdrawal, annual withdrawal growth, assumed investment return, and forecast horizon to show total income taken and the estimated ending balance.

This is especially useful for stress-testing whether a chosen income path appears compatible with a lump-sum pension strategy. The projection assumes one return rate each year and does not model market sequence risk, taxes, or changes in spending unless you reflect them in the inputs.

Inputs

$
$
%
%
years
Result
—
Projected total withdrawals
Ending balance—
Final-year withdrawal—
Average annual withdrawal—
First depletion year—

1. Enter the starting balance
Use the pension lump sum available at the beginning of the forecast.

2. Set first-year income
Enter the withdrawal you plan to take during year 1.

3. Choose withdrawal growth
Use a positive rate for increasing income, 0% for a flat withdrawal, or a negative rate for a declining schedule.

4. Set the return assumption
Enter the annual return you want applied to the remaining balance before each year’s withdrawal.

5. Choose the forecast horizon
Review total withdrawals, ending balance, and whether the modeled balance is depleted during the period.

The calculator runs a year-by-year projection:

Balance after growth = Beginning balance × (1 + r) Withdrawal in year t = W₁ × (1 + g)^(t−1) Ending balance = max(0, Balance after growth − Withdrawal)

r is the annual investment return, g is annual withdrawal growth, and W₁ is the first-year withdrawal. If the requested withdrawal exceeds the available balance, only the available amount is counted as withdrawn and the account is treated as depleted.

What the result means

The main result adds the actual modeled withdrawals across the forecast period. The ending balance shows what remains after applying the assumed return and withdrawal schedule.

Because returns are modeled as constant, the estimate does not capture sequence-of-returns risk or investment volatility.

Given: $600,000 starting balance, $30,000 first-year withdrawal, 2% annual withdrawal growth, 5% annual return, and 20 years.

Calculation: year 1 grows to $630,000 before a $30,000 withdrawal, leaving $600,000. Year 2 grows to $630,000 before a $30,600 withdrawal, leaving $599,400. The process repeats with the withdrawal increasing 2% each year.

Result: the calculator sums all modeled withdrawals and reports the year-20 balance using the same sequence.

Why does the return apply before the withdrawal?

This model assumes each annual return is earned before that year’s withdrawal. A different timing convention would produce a somewhat different result.

What does the depletion year mean?

It is the first forecast year in which the requested withdrawal is larger than the balance available after growth. “Not depleted” means the modeled balance stays above zero through the selected horizon.

Can withdrawal growth represent inflation?

Yes, you can use it as a simple inflation-style increase. It is still only an assumption and does not automatically track an inflation index.

Are taxes deducted from withdrawals?

No. Enter gross withdrawals here. For tax-focused planning, use the Pension Lump Sum Tax Impact Estimator.

Why can the ending balance grow even while I withdraw money?

If assumed investment gains are large enough relative to withdrawals, the modeled balance can remain stable or increase. That outcome depends entirely on the inputs and is not guaranteed.