Annuity Payout Calculator
Turn a lump sum into income. Solve it either direction: pick a payout length to see the payment your principal supports, or pick a withdrawal amount to see how long the money lasts — with a year-by-year balance schedule.
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Compare providersHow the payout phase works
During the payout (distribution) phase, each withdrawal comes partly from interest the remaining balance is still earning and partly from principal. Early on, interest covers most of the payment; as the balance shrinks, principal does more of the work — the mirror image of a loan amortization. That is why a $500,000 balance at 5% can pay out far more than $500,000 in total: the money keeps earning while it is being drawn down.
Choose the fixed-length option when you know how long the income must last (say, bridging to Social Security). Choose the fixed-payment option when you know the income you need and want to know when the well runs dry.
How it’s calculated
With per-period rate r = annual rate ÷ payouts per year and n payouts: payment = P × r ÷ (1 − (1 + r)−n). Solving for duration instead: n = −ln(1 − P×r ÷ W) ÷ ln(1 + r); if W ≤ P×r the balance never runs out. Totals and the schedule come from a period-by-period simulation (interest credited, then the withdrawal taken).
Assumes a level return every period and level withdrawals, with no fees, taxes, or insurance charges. A quoted commercial annuity will differ. Estimates only — not financial advice.
Annuity balance by year
Simulated with interest credited each period before the withdrawal.
Worked example
$500,000 earning 5% and paid out monthly over 20 years supports $3,299.78 a month — 240 payouts totaling $791,947, of which $291,947 is interest earned during the drawdown. Flip the mode: withdrawing a fixed $3,000 a month instead, the money lasts 23 years 10 months (286 payouts, the last one partial) and you collect $855,427 in total. Withdraw $2,083 or less — the monthly interest — and the balance never runs out.
Common mistakes
- Dividing principal by years and ignoring the interest still earned during payout — it understates the payment badly.
- Comparing this period-certain math to a life-only insurance quote as if they were the same product.
- Forgetting taxes: qualified-annuity payouts are ordinary income, so spendable income is less than the gross payment.
- Assuming a high return for a phase of life when the money is usually parked conservatively.
Where it is used
- Sizing retirement income from a 401(k), IRA, or annuity balance.
- Checking how long savings last at a planned monthly withdrawal.
- Comparing an insurer’s annuitization quote against do-it-yourself drawdown.
- Structuring payouts from a settlement, inheritance, or lottery lump sum.
Frequently asked questions
What withdrawal makes the money last forever?
Anything at or below the interest earned each period. On $500,000 at 5% with monthly payouts that is about $2,083 a month (500,000 × 0.05 ÷ 12) — withdraw only that and the principal never shrinks. The calculator flags this case automatically in fixed-payment mode.
Is this the same as what an insurance company would quote?
Not exactly. This models a fixed-period (period-certain) payout of your own balance at a stated return. A life annuity quote also prices your life expectancy, the insurer’s costs, and profit, so its payment can be higher or lower than the period-certain math — especially at older ages.
Are annuity payouts taxed?
Usually in part. Payouts from qualified annuities (funded with pre-tax retirement money) are fully taxable as ordinary income. For non-qualified annuities only the earnings portion is taxable; the return of your own principal is not. Withdrawals before age 59½ can also face a 10% penalty on earnings.
What happens to leftover money if I die during the payout?
With a fixed-length or fixed-amount payout of your own balance, the remaining funds pass to your heirs. Life-only insurance annuities are different: payments stop at death with nothing left over, which is part of why their quoted payments run higher.
Why does the payout frequency change the numbers slightly?
More frequent withdrawals pull money out earlier, so slightly less interest accrues between payments. The per-period rate is the annual rate divided by the number of payouts per year, so monthly and annual modes compound a little differently.