How Much Retirement Income Will $500,000 Generate?

A common question with no one-size answer — here is a clear starting point and what actually changes it.

Where the 4% comes from

The 4% rule is a long-standing guideline suggesting you can withdraw about 4% of your savings in the first year of retirement, then adjust for inflation, with a strong chance the money lasts 30 years. On $500,000 that is about $20,000 in year one. It is a useful baseline, not a guarantee — it depends on market returns and sequence of returns risk.

Why your real number is different

• Your age and timeline: starting income later generally allows a higher payout rate.
• Market risk: a bad stretch early in retirement can force you to spend less to avoid running out.
• Inflation: $1,667 today buys less in 15 years, so your plan has to account for rising costs.
• Taxes: whether the money is in an IRA, 401(k), or after-tax account changes what you keep.

How an annuity changes the math

A fixed indexed annuity with a guaranteed lifetime income rider works differently from the 4% rule. Instead of hoping the market cooperates, the insurer contractually guarantees a withdrawal percentage for life — often higher than 4% depending on your age — and the income continues even if the account value runs down. That trades some flexibility for certainty: a paycheck you cannot outlive. Guarantees depend on the issuing insurer's claims-paying ability.

The bottom line

$500,000 can reasonably support somewhere around $20,000+ per year, but the right strategy — and whether part of it should be guaranteed — depends on your situation. A short review can show you a realistic, personalized number.