On a $1,000,000 nest egg, the 4% safe withdrawal rule generates $3,333 a month — $40,000 drawn annually in equal monthly installments. That single number answers the question most near-retirees are really asking, but the math changes depending on your balance, the withdrawal method you choose, and what other income sources you're counting on.
This guide covers three standard methods — the 4% rule, a fixed annuity payout, and IRS Required Minimum Distributions — with the math fully worked for each. Use the retirement calculator to model your specific balance, time horizon, and expected return. Then use the table below to find your baseline monthly income number.
Key Takeaways
- At the 4% rule, a $1,000,000 nest egg pays $3,333/month; $500,000 pays $1,667/month; $2,000,000 pays $6,667/month.
- A single-premium immediate annuity (SPIA) at age 65 typically pays 5.5%–7% of the premium annually — more per month than the 4% rule, but the principal is gone and there's no inflation hedge without a rider.
- IRS Required Minimum Distributions at age 73 imply a withdrawal rate of 3.77% — slightly below the 4% rule, rising each year as the IRS life expectancy factor shrinks.
- The average Social Security retirement benefit was $2,071/month as of January 2026 (SSA.gov, October 2025), which many retirees stack on top of their portfolio draws.
The 4% Rule — Monthly Income for Any Balance
William Bengen's 1994 analysis in the Journal of Financial Planning established that retirees who withdrew 4% of their portfolio value in year one — and adjusted that dollar amount for inflation in every subsequent year — had a high probability of their portfolio lasting 30 or more years, even through the worst market sequences of the 20th century (Bengen, W., Journal of Financial Planning, October 1994). The rule wasn't designed as the maximum safe withdrawal rate; it was the historically demonstrated floor.
The monthly math is a single formula: Monthly income = (Nest egg × withdrawal rate) ÷ 12. At 4%: $1,000,000 × 0.04 ÷ 12 = $3,333/month. The table below runs that calculation across six common nest egg sizes and four withdrawal rate assumptions.
| Nest Egg | 3.0% / yr | 3.5% / yr | 4.0% / yr | 4.5% / yr |
|---|---|---|---|---|
| $250,000 | $625 | $729 | $833 | $938 |
| $500,000 | $1,250 | $1,458 | $1,667 | $1,875 |
| $750,000 | $1,875 | $2,188 | $2,500 | $2,813 |
| $1,000,000 | $2,500 | $2,917 | $3,333 | $3,750 |
| $1,500,000 | $3,750 | $4,375 | $5,000 | $5,625 |
| $2,000,000 | $5,000 | $5,833 | $6,667 | $7,500 |
Formula: (Nest egg × annual withdrawal rate) ÷ 12. All figures rounded to the nearest dollar. Assumes year-one draw with subsequent inflation adjustments — not a flat dollar amount.
Which column should you use? Morningstar's "What's a Safe Retirement Withdrawal Rate for 2026?" placed the sustainable withdrawal rate at 3.9% for a 30-year horizon and a 90% success threshold with a 30%–50% equity allocation — up from 3.7% in their 2025 report, with improved bond yields driving the increase (Morningstar, December 2025). Practically speaking: if you hold a diversified stock-and-bond portfolio with a 30-year horizon, 4% remains the widely accepted benchmark. If your portfolio is heavily weighted toward bonds or CDs, or if you're retiring at 60 with a 35–40 year horizon, model at 3.5% to be conservative.
The table above is the starting point. Run your own balance with your actual allocation and expected return in the retirement calculator to see whether your draw holds up through a range of market cycles.
Method 2 — The Fixed Annuity Payout Factor
A single-premium immediate annuity (SPIA) converts a lump sum into a guaranteed monthly check that continues for life — or for a specified period — regardless of market performance. The payout rate is higher than the 4% rule because annuities operate on two additional mechanisms that a self-managed portfolio can't replicate.
First, the insurer's investment portfolio earns institutional-grade yields. Second — and more important — mortality credits flow from annuitants who die early to those who outlive the average. The insurer pools longevity risk across thousands of policyholders, which means each individual effectively gets paid for surviving. For a 65-year-old male with a single-life immediate annuity, typical payout rates from highly rated carriers ranged from 5.5% to 7% of the premium annually as of mid-2026, based on quotes aggregated by Blueprint Income and Immediateannuities.com for June 2026, with the range reflecting differences in carrier, interest rates, and period-certain options. On a $1,000,000 premium at a 6.5% payout rate (illustrative — actual rates vary by insurer, age, and interest rate environment at purchase), that's $5,417/month — $2,084 more per month than the 4% rule on the same balance.
What the annuity gives up
- No residual value. The $1M premium is gone. If you die in year two, the insurer keeps the rest (unless you add a "period-certain" rider, which reduces the monthly payout).
- No inflation adjustment. Unless you purchase a cost-of-living adjustment (COLA) rider — which meaningfully reduces the initial monthly payout — the nominal dollar amount stays flat while purchasing power erodes.
- Irreversible. Once you've annuitized, you cannot access the principal for emergencies. This makes liquidity planning critical before purchasing.
The right approach for most retirees isn't annuity-or-portfolio — it's a combination. Annuitize enough to cover fixed essential expenses (housing, food, insurance premiums); invest the remainder and use the 4% rule on that portion. For the full decision framework, see our 4% rule guide.
Method 3 — Required Minimum Distributions at Age 73
If you hold pre-tax retirement accounts — a traditional IRA, 401(k), 403(b), or similar — the IRS requires you to take minimum withdrawals beginning at age 73 (age 75 for those born in 1960 or later, under the SECURE 2.0 Act). The formula uses the IRS Uniform Lifetime Table from IRS Publication 590-B:
Annual RMD = Prior December 31 account balance ÷ IRS life expectancy factor
At age 73, the IRS distribution period is 26.5. On a $1,000,000 account: $1,000,000 ÷ 26.5 = $37,736/year = $3,145/month. That's a 3.77% implied withdrawal rate — slightly below the 4% rule. The required rate rises each year as the distribution period shortens:
| Age | IRS Factor | Implied Rate | Monthly Income on $1M |
|---|---|---|---|
| 73 | 26.5 | 3.77% | $3,145 |
| 75 | 24.6 | 4.07% | $3,388 |
| 80 | 20.2 | 4.95% | $4,125 |
| 85 | 16.0 | 6.25% | $5,208 |
| 90 | 12.2 | 8.20% | $6,831 |
Source: IRS Uniform Lifetime Table, Publication 590-B (2025). Monthly income = annual RMD ÷ 12, calculated on a $1,000,000 opening balance. Actual balance will change year to year.
Two critical caveats: RMDs are a floor, not a ceiling — you can always withdraw more. And Roth accounts are exempt from RMDs during the original owner's lifetime, so if your retirement savings span both traditional and Roth accounts, the RMD calculation applies only to the pre-tax balance. For the penalty rules, calculation worksheets, and inherited-IRA rules, see our complete RMD guide.
Your Total Monthly Retirement Income: Portfolio Plus Social Security
The three methods above calculate income from investment accounts only. In practice, most retirees layer in at least one guaranteed income source — most commonly Social Security, and in some cases a pension.
The average Social Security retirement benefit was $2,071/month as of January 2026 (SSA.gov, October 2025). That's the mean across all retired-worker beneficiaries; individual amounts vary widely based on your 35 highest-earning years and the age you claim. Delaying from age 62 to age 70 raises your benefit by approximately 77% — a 70% benefit at 62 versus 124% at 70 of your full retirement amount (SSA.gov, 2025). For the full break-even analysis, see our Social Security timing guide.
A worked example: combining sources
Consider a couple where one spouse holds $800,000 in a rollover IRA, and both claim Social Security at full retirement age (67):
| Income Source | Monthly Amount |
|---|---|
| Social Security — higher earner | $2,400 |
| Social Security — lower earner | $1,400 |
| Portfolio at 4% ($800,000) | $2,667 |
| Total monthly income | $6,467 |
That combined $6,467/month is before taxes. Traditional IRA distributions are taxed as ordinary income; Social Security is partially taxable depending on your combined income. Roth IRA withdrawals are tax-free. Getting the account sequencing right — which accounts to draw first — can significantly affect how much of that gross figure you actually keep.
When the numbers fall short
The Federal Reserve's 2022 Survey of Consumer Finances found the median retirement account balance for households aged 65–74 was approximately $200,000 — which at 4% generates only $667/month (Federal Reserve, SCF 2022). For retirees whose portfolio draw falls short of expenses, the most effective levers are:
- Delay Social Security. Claiming at 62 reduces your benefit to 70% of your full retirement amount; waiting to 70 gets you 124%. That gap — roughly 77% more income per month — is one of the highest risk-free returns available, and it compounds for life (SSA.gov, 2025).
- Work part-time for 2–4 years. Even $1,500/month of earned income dramatically reduces the portfolio draw required in early retirement, when sequence-of-returns risk is highest.
- Reduce the draw temporarily. Cutting spending 10–15% in a bad sequence-of-returns year can extend portfolio longevity by 5+ years.
- Downsize housing. Equity released from a home sale can significantly boost the investable nest egg.
For benchmarks on how your savings compare by age, see our retirement savings by age guide.
Three Steps to Calculate Your Monthly Retirement Income
Step 1 — Add up your retirement balances
Include all tax-advantaged accounts: 401(k), 403(b), traditional IRA, Roth IRA, SEP-IRA, and any taxable brokerage accounts earmarked for retirement. Don't include home equity unless you plan to sell or take a reverse mortgage. The number you land on is your starting nest egg for the calculations above.
Step 2 — Choose your withdrawal method and rate
If you want flexibility and plan to leave assets to heirs, use the 4% rule from the table above. If you want simplicity and guaranteed income, price out a SPIA with an independent insurance broker (never buy an annuity from a single-carrier salesperson). If you're 73 or older (or 75 or older if you were born in 1960 or later, under SECURE 2.0), calculate your first-year RMD using the IRS table — you'll need to satisfy it regardless of what your overall income plan says.
Use the retirement calculator to stress-test your number: plug in a lower expected return (5–6% real instead of 7–8%) and a longer time horizon to see how much cushion you have.
Step 3 — Add non-portfolio income
Request your Social Security estimate from ssa.gov (create a My Social Security account). Add any pension income. The sum of portfolio draw plus guaranteed income is your gross monthly retirement income before taxes. If that total covers your projected expenses with a reasonable margin, your plan is viable. If not, the levers in the section above show where to look for the gap.
Frequently Asked Questions
Is the 4% rule still safe in 2026?
For most retirees with a diversified portfolio and a 30-year horizon, yes. Morningstar's "What's a Safe Retirement Withdrawal Rate for 2026?" placed the sustainable rate at 3.9% for a 30-year horizon at a 90% success threshold — barely below Bengen's original 4%. If you're retiring younger (before 60) or hold a very conservative allocation, use 3.5% as your planning floor and revisit the calculator annually (Morningstar, December 2025).
How much monthly income does $500,000 generate?
At the 4% rule: $500,000 × 0.04 ÷ 12 = $1,667/month. At a 3.5% conservative rate: $1,458/month. If you annuitize the full $500,000 at age 65, a single-life SPIA at a 6.5% payout rate would pay approximately $2,708/month — but the principal is not recoverable. Social Security income stacks on top of either approach.
What is the RMD for a $1 million IRA at age 73?
$1,000,000 ÷ 26.5 (IRS Uniform Lifetime Table, age 73) = $37,736/year, or $3,145/month. The prior December 31 balance is used, not current value, and you must take the distribution by December 31 of the year (or April 1 in your first RMD year). Missing the deadline triggers a 25% excise tax on the undistributed amount (IRS Publication 590-B, 2025).
Can I live on the interest only in retirement without touching principal?
Only at very high balances. A $2,000,000 portfolio earning 5% annually generates $100,000/year — $8,333/month — and principal stays intact. But "interest only" means your income is exposed to rate changes and investment risk with no smoothing mechanism. Most financial planners recommend a structured drawdown plan over an interest-only strategy for portfolios under $3–4 million.
Does inflation shrink my monthly retirement income over time?
Under the 4% rule as Bengen defined it, the dollar amount rises each year with inflation — so real purchasing power stays constant. If you use a flat fixed dollar draw (common in practice), inflation does erode your real income over time. At a 3% annual inflation rate — consistent with the U.S. long-run CPI average (BLS CPI series, 2024) — $3,333/month in 2026 has the purchasing power of $2,479 in 2036 and $1,844 in 2046, a meaningful reduction over a 20-year retirement.
Calculate Your Number
The four-column table above gives you the monthly income your savings can sustain at any of the standard withdrawal rates. The choice of rate depends on your age at retirement, your portfolio mix, your other income sources, and your risk tolerance for sequence-of-returns volatility in the early years.
Plug your balance into the retirement calculator to model different return assumptions and time horizons, and see whether the monthly draw you need actually holds up through a 30-year simulation. The math in this guide gives you the starting number; the calculator shows whether it lasts.