A pension without drawing down capital

📖 The story

Mrs. Lindqvist has $450,000 and wants to withdraw only the earnings, so the capital stays intact for her children. She invests it safely at 5 %.

ℹ Interest withdrawal only, capital remains untouched.

Change any number and press "Calculate" – or use "Type in" on the right to watch it entered.

What you learn

Anyone who withdraws only the interest secures a permanent pension and passes on the capital undiminished – capital preservation instead of capital drawdown.

In short: Anyone who withdraws only the interest secures a permanent pension and passes on the capital undiminished.

Formula

R = K0 · i_per or K0 = R / i_per

With the example numbers

R = 450.000,00 € · ((1+0,0500)^1/12 − 1) = 1.833,36 €

How to read the formula

The perpetual pension uses only the interest: R = K₀·i. As long as you never withdraw more than the interest produces, the capital stays untouched and the pension flows indefinitely – rearranged, K₀ = R/i gives the capital needed for it.

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