Annuity Payout Calculator
The level income a lump sum pays over the years you choose, the interest-only income that never touches it, and how long a payment you pick would last.
Result
Payment each period: $2,639.18
At a fixed rate, before fees and tax. A real annuity quote uses the insurer’s own rates.
- Interest-only payment
- $1,666.67
- Total received
- $791,755.26
- Of which interest
- $291,755.26
https://calcgallery.com/time-value/annuity-payout-calculator/
Results are arithmetic on the returns, rates and horizons you enter, not a forecast and not investment, tax or retirement advice. The site supplies no expected return, inflation rate, contribution limit, tax rate or withdrawal rate. Real returns vary from year to year, and fees, taxes and the order of returns all change the outcome. Check anything that matters with a qualified adviser. Read the full disclaimer
How to use the Annuity Payout Calculator
- Enter the lump sum you have, how many years you want it to pay out, and the rate it earns meanwhile.
- Read the level payment each period, and the interest-only payment that would leave the lump sum untouched.
- Optionally enter a payment of your own to see how long it would last.
The formulas
With the amount P, a rate i per period and n payments:
payment = P × i ÷ (1 − (1 + i)^−n)interest only = P × iperiods a payment X lasts = −ln(1 − P × i ÷ X) ÷ ln(1 + i)The last formula only works when X is larger than P × i. If it is not, the interest covers the payment, the balance never falls, and the logarithm has no answer. The page reports that case in words.
Drawing down or living on interest
A payment that runs the lump sum down to zero is always larger than the interest-only payment, because it spends the principal too. The difference is the price of keeping the principal intact: at 4%, 500,000 pays about 2,639 a month for 25 years, or about 1,667 a month forever.
With your numbers
- Payment = $500,000.00 × i ÷ (1 − (1 + i)^−300) = $2,639.18, with i = 0.3333% a period
- Interest only = $500,000.00 × 0.3333% = $1,666.67
- $3,000.00 each period lasts 20.31 years
Quick reference
At a fixed rate, before fees and tax. A real annuity quote uses the insurer’s own rates.
| Example | Payment each period |
|---|---|
| 500,000 over 25 years at 4% | $2,639.18 |
| Same at 0% | $1,666.67 |
| How long 3,000 a month lasts | $2,639.18 |
| How long 1,600 a month lasts | $2,639.18 |
| 200,000 over 15 years, quarterly | $4,151.67 |
| 1,000,000 over 30 years, annually | $65,051.44 |
Common questions about the Annuity Payout Calculator
- How long will my money last?
- Enter the payment you want in the test field. 500,000 earning 4% a year pays 3,000 a month for about 20.3 years. A payment no larger than the interest, here about 1,667 a month, never runs the balance down, and the page says so rather than giving an endless number of years.
- Why is this the same as a loan payment?
- Because it is the same arithmetic with the roles swapped. A loan of 500,000 at 4% over 25 years costs 2,639.18 a month; a lump sum of 500,000 earning 4% can pay you 2,639.18 a month for 25 years. The page is pinned to the loan payment calculator to the cent.
- What if the rate is 0%?
- Then the payment is the lump sum divided by the number of payments, and the interest-only payment is nothing. At 0%, 500,000 over 25 years of monthly payments is 1,666.67 a month, which happens to equal the interest-only payment at 4%. That is a coincidence of these numbers, not the same calculation.
- Is this what an insurance company would pay?
- Not exactly. An insurer's annuity pays according to its own rates and, for a life annuity, its mortality tables, less its costs. This page shows the arithmetic at the rate you enter, which is useful for comparing against a quote.