Annuity Payout Calculator

How much will my annuity pay?

The payout depends on four things and nothing else: how much you start with, what the balance earns, how long you want to be paid, and how often. Age, sex and health play no part, because nothing here is insured — you are simply spending down a balance you own while the remainder keeps earning.

Two balances of the same size can therefore support very different payments. Stretch the same money over thirty years instead of ten and the monthly figure falls by more than half, while the total paid out rises, because the balance stays invested for longer. The table below shows the pattern across a range of starting balances at one set of assumptions; change any of them in the calculator to see your own case.

What the table cannot tell you is whether the payment is enough. That depends on the rest of your income and on inflation, which is why the purchasing-power section further down restates the same payment in today’s money.

The payout rate is identical on every row because it does not depend on the size of the balance — only on the return and the term. Change either in the calculator above and every figure here moves with it.

How the annuity payout calculator works

The calculator solves one balance equation for whichever quantity you leave unknown. In Calculate payout you supply the balance, the return, the term and the frequency, and it returns the level payment that draws the balance down to your chosen ending balance exactly as the term ends. The other three modes rearrange the same equation: Calculate investment needed solves for the starting balance, Calculate payout duration for the term, and Calculate required return for the rate.

Every mode runs the same code and produces the same schedule, so the four answers are consistent with one another by construction. Take the payout the first mode gives you, feed it back into any of the other three, and you recover exactly the input you started from — the automated test suite checks precisely this round trip on several hundred parameter combinations.

The schedule is the source of truth. Totals, the annual view and the chart are all derived from the same period-by-period rows, which is why the headline figure, the schedule and the summary sentence can never disagree with one another.

Annuity payout formula

For the standard case — a level payment at the end of each period, running the balance down to zero — the payout is:

PMT = PV × r / (1 − (1 + r)−n)

• PMT — the payment you receive each period, which is what the calculator returns.
• PV — the present value: the balance you start with.
• r — the periodic rate, not the annual one. With R the effective annual return and m the payments per year, r = (1 + R)1/m − 1. Compounding r back m times returns exactly R, which R ÷ m would not.
• n — the total number of payments, n = m × years.

Two extensions are used by the calculator and not shown above. Beginning-of-period payments divide the result by (1 + r), because each payment loses one period of compounding. A desired ending balance B subtracts its present value from PV. When r is zero the expression has no value, so the calculator takes a separate linear branch, PMT = (PV − B) / n, rather than dividing by zero.

Worked example

Take $250,000 at an effective 4.59% a year, paid monthly for 20 years:

• r = (1 + 0.0459)1/12 − 1 = 0.00374682
• n = 12 × 20 = 240
• PMT = $250,000 × 0.00374682 / (1 − (1 + 0.00374682)−240) = $1,581.11

Over the 20 years that pays $379,465.85 in total: the original $250,000.00 back, plus $129,465.85 the balance earned while it was being drawn down. The effective payout rate is 7.59% — the arithmetic consequence of returning capital over 20 years, not a 7.59% return.

This example is computed by the same engine as the calculator, at the same default rate, and is checked against it by the automated test suite. It is not a transcribed figure.

How interest rates affect annuity payouts

The return does most of the work in a long payout and very little in a short one. Over twenty years the balance is earning for the whole period, so a percentage point either way moves the monthly payment noticeably. Over three years there is barely time for compounding to matter, and the payment is dominated by simply dividing the balance by the number of payments.

The sensitivity table is computed from your own inputs at the return you entered and at one and two percentage points either side. It is a projection, not a forecast: this calculator holds the return constant for the whole term, which no real portfolio does. Treat the spread as a measure of how exposed your plan is to being wrong about the return, not as a range of likely outcomes.

How payout length affects monthly income

Term length is the lever with the largest effect on the monthly figure, and the one people underestimate. Halving the term does not double the payment — it more than doubles it, because a shorter term returns capital faster and gives growth less time to contribute.

The comparison below recomputes your own case over a range of terms. Read the payout column and the total-payments column together: the shortest term always has the highest monthly payment and the lowest lifetime total, and the longest term the reverse. Neither is better arithmetic; they are different trade-offs between income now and income later.

How inflation affects annuity income

A level payment loses purchasing power every year it stays level. The payments in the schedule are nominal — the same number of dollars each period — so the question the inflation field answers is what those dollars will actually buy.

The table restates your own payment in today’s money at the inflation rate you set, at the start and at five, ten and twenty years out, for as far as your term reaches. The deflator is the only thing inflation does here: it does not change the payments themselves.

If you want the payment to keep pace rather than merely be measured against inflation, the advanced Annual payout increase field steps the payment up once a year. It is a real change to the arrangement, not a display option: a rising payment starts lower, and the schedule and every total reflect that.

Fixed-period payout vs lifetime annuity

This calculator models the left-hand column. The right-hand column is a different product, priced by an insurer from a mortality table, and is described here only so the two are not confused. No figure on this page is an insurer quote.

Immediate vs deferred annuity

An immediate annuity converts a lump sum into income that begins straight away — conventionally within a year of purchase. A deferred annuity is bought now but starts paying at a chosen future date, so the money accumulates first and the income phase begins later.

This calculator models the payout phase only, starting today. If your income starts in the future, work out the balance you expect to have on that date first, then bring that figure here as the starting balance and set the term to the payout period. The accumulation step is a separate calculation, and the site’s deferred-annuity accumulation calculator handles it.

The distinction matters commercially as well as arithmetically: deferring income means the money is exposed to the market or the insurer for longer, which changes both the risk and, for an insured product, the price.

Lifetime vs period-certain payments

A period-certain arrangement pays for a set number of years and stops — that is what this calculator models. A lifetime arrangement pays until death, however long that turns out to be, and only an insurer can offer it, because only an insurer can pool the risk of you living a very long time.

The two are often blended. Life with period certain pays for life or for a minimum number of years, whichever is longer, so beneficiaries receive the balance of the certain period if the holder dies early. Joint and survivor continues while either of two people is alive. Cash and installment refund options continue until the payments have returned the original premium. Each of these protections lowers the payment relative to a life-only contract, because each one takes risk back from the pool.

If you want a projection that never runs out on its own terms, set a desired ending balance equal to your starting balance: the calculator then returns the interest-only payment, which preserves the capital indefinitely at the return you entered. That is not longevity insurance — it is simply spending only what the balance earns.

What determines a lifetime annuity payout?

None of the following is modelled here, because pricing a life contingency honestly requires a mortality table this calculator deliberately does not carry. They are listed so you can see what a real quote depends on.

AGE AT THE START OF INCOME is the single largest factor: a shorter expected payout period means a higher payment for the same premium. SEX is used in most jurisdictions for the same reason, where regulation permits it. THE INTEREST-RATE ENVIRONMENT at the moment of purchase sets the return the insurer can earn on your premium, which is why quotes move with bond yields.

MORTALITY ASSUMPTIONS — the table and improvement scale the insurer applies — determine the mortality credit, the subsidy from those who die early to those who live long. GUARANTEES such as a period certain, a cash refund or a death benefit each reduce the payment, because each returns risk to the insurer. SINGLE OR JOINT LIFE matters for the same reason: covering two lives means paying for longer.

THE INCOME START DATE separates immediate from deferred contracts and changes the price substantially. And finally THE INSURER AND PRODUCT themselves: pricing, expense loads and credit quality differ between issuers, which is why identical inputs produce different quotes from different companies. Only a licensed insurer can tell you what any of this is worth on a given day.

What happens to the principal?

In a fixed-period payout the principal is yours throughout. Each payment is part growth and part capital: the growth portion is what the balance earned that period, and the rest comes out of the balance itself. The schedule splits every payment into exactly these two components, and the running ending balance is what you would still hold if you stopped at that point.

This is the substantive difference from an insured lifetime contract. There, the premium generally passes to the insurer in exchange for the income promise, and what remains at death depends entirely on the option purchased — a life-only contract leaves nothing. Here, whatever the schedule shows as the ending balance is still your money.

It also explains why the effective payout rate is higher than the return. Only the growth component is income in an economic sense; the rest is your own capital being handed back, which is exactly why the balance reaches zero at the end of the term.

Taxes on annuity payments

Every figure on this page is gross. No tax model is applied, and none should be inferred: this is deliberately not an annuity tax calculator.

What tax is actually due depends on things this calculator does not ask for. THE ACCOUNT TYPE comes first — money inside a qualified account is generally taxed differently from money in a taxable one. THE COST BASIS matters next: capital you have already paid tax on is not taxed again when it comes back. For a non-qualified annuity contract the two are combined in an EXCLUSION RATIO, which sets the share of each payment treated as a tax-free return of basis and the share treated as taxable earnings. And JURISDICTION applies throughout, since state and national rules differ.

Withdrawals before age 59½ may also carry an additional federal penalty on the taxable portion. The IRS publications cited in the sources section set out the current rules; a tax professional can apply them to your situation. Nothing here is tax advice.

What this calculator does not do

This calculator models a fixed-period payout from a starting balance. It does not quote a lifetime annuity insurance contract.

• It does not quote a lifetime annuity, because pricing one requires a mortality table this calculator deliberately does not carry.
• It does not price age, sex, health or joint-life options.
• It does not model variable or indexed annuity crediting formulas, caps, participation rates or riders.
• Inflation is applied as a display-only deflator; it does not change the nominal payments.