💸 Annuity Payout Calculator: How Much Income Will It Pay?
By Shihab Mia · Updated 2026-07-09
This annuity payout calculator is an educational estimate of a fixed-period drawdown, not financial, tax, or insurance advice. Real annuity products add fees, riders, taxes, and lifetime options that change your payout, so confirm figures with a licensed advisor before you buy.
Your annuity payout
This annuity payout calculator shows the level income a starting balance will pay you during the payout phase, when the money is drawn down with interest over a fixed number of years. Enter your principal, the annual interest rate, and the payout period, choose monthly or annual payments, and the tool returns the exact payment that fully depletes the balance by the end of the term. It also shows the total you will receive and how much of that is interest earned along the way.
What is the Annuity Payout Calculator?
An annuity has two phases: the accumulation phase, when money grows, and the payout phase, when it is distributed back to you as income. This annuity payout calculator models the payout phase of a fixed-period (period-certain) annuity, where a known balance is paid out in equal installments over a set number of years until it reaches zero. Because the remaining balance keeps earning interest while it is being drawn down, each payment is larger than simply dividing the principal by the number of payments.
The math is the standard present-value-of-an-annuity formula solved for the payment. Let r be the periodic interest rate (the annual rate divided by the number of payments per year) and n be the total number of payments (years multiplied by payments per year). The level payout is PMT = P * r / (1 - (1 + r)^(-n)). When the interest rate is zero, the formula collapses to P / n, an even split of the principal. This is the same equation a lender uses to amortize a loan, only here you are the one receiving the payments instead of making them.
The annuity payout calculator reports three numbers. The payout per period is your regular income. The total paid out over the term is that payment multiplied by every period, which is always more than your principal because of the interest the balance earns. The total interest earned is the difference between the two, and it shows why a fixed-period annuity can stretch a lump sum further than a plain savings withdrawal. A higher rate or a shorter term raises each payment; a lower rate or a longer term lowers it.
One important distinction: this tool models a fixed-period annuity, not a lifetime (life) annuity. A period-certain payout runs for exactly the years you enter and then stops, whether you are still alive or not. A lifetime annuity instead pays for as long as you live and is priced using mortality tables and insurer assumptions, so its payout cannot be reproduced by a simple formula. Use this annuity payout calculator to size a fixed-term income stream, to compare a lump sum against a period-certain payout, or to sanity-check an insurer's fixed-period quote.
When to use it
- Estimating the monthly income a retirement lump sum would produce if drawn down evenly over a set number of years.
- Comparing a cash lump-sum offer against a fixed-period payout to see which delivers more total value.
- Sanity-checking an insurance company quote for a period-certain annuity before you sign.
- Planning a bridge income, such as covering the years between early retirement and when Social Security or a pension starts.
- Seeing how a higher or lower interest rate changes the income a fixed annuity balance can support.
- Structuring a structured-settlement or inheritance payout over a chosen number of years.
How to use the Annuity Payout Calculator
- Enter your starting principal, the balance you want to convert into income.
- Type the annual interest rate the annuity or account earns during the payout phase.
- Set the payout period in years, how long you want the income to last (20 years is a common default).
- Choose the payout frequency, Monthly or Annually, to match how you want to receive the money.
- Read the payout per period, the total paid out over the term, and the total interest earned.
Formula & method
Worked examples
You have a $500,000 balance earning 5% and want monthly income for 20 years.
- Periodic rate r = 5% ÷ 100 ÷ 12 = 0.00416667
- Number of payments n = 20 × 12 = 240
- PMT = 500,000 × 0.00416667 ÷ [1 − 1.00416667^-240]
- The bracket = 1 − 0.368646 = 0.631354, so PMT = 2,083.33 ÷ 0.631354
Result: Monthly payout about $3,299.78, total paid out $791,946.89, interest earned $291,946.89
You have a $250,000 balance earning 4% and want a single annual payment for 20 years.
- Periodic rate r = 4% ÷ 100 ÷ 1 = 0.04
- Number of payments n = 20 × 1 = 20
- PMT = 250,000 × 0.04 ÷ [1 − 1.04^-20]
- The bracket = 1 − 0.456387 = 0.543613, so PMT = 10,000 ÷ 0.543613
Result: Annual payout about $18,395.44, total paid out $367,908.75, interest earned $117,908.75
Monthly payout on a $250,000 balance over 20 years, by interest rate
| Interest rate | Monthly payout | Total paid out | Interest earned |
|---|---|---|---|
| 3% | $1,386.49 | $332,758.56 | $82,758.56 |
| 4% | $1,514.95 | $363,588.20 | $113,588.20 |
| 5% | $1,649.89 | $395,973.44 | $145,973.44 |
| 6% | $1,791.08 | $429,858.64 | $179,858.64 |
| 7% | $1,938.25 | $465,179.36 | $215,179.36 |
Monthly payout on a $500,000 balance at 5%, by payout period
| Payout period | Monthly payout | Total paid out |
|---|---|---|
| 10 years | $5,303.28 | $636,393.09 |
| 15 years | $3,953.97 | $711,714.26 |
| 20 years | $3,299.78 | $791,946.89 |
| 25 years | $2,922.95 | $876,885.06 |
| 30 years | $2,684.11 | $966,278.92 |
Common mistakes to avoid
- Confusing a fixed-period payout with a lifetime annuity. This calculator models a period-certain payout that runs for exactly the years you enter and then stops. A lifetime annuity pays until you die and is priced with mortality tables, so its income cannot be reproduced by this formula. Do not assume the two are interchangeable.
- Just dividing the principal by the number of years. Splitting the balance evenly ignores the interest the remaining money keeps earning while it is paid out. That undercounts your income. The correct payout is always higher than principal divided by the number of payments whenever the rate is above zero.
- Ignoring fees, taxes, and inflation. Real annuities charge fees and riders, payouts are often taxable, and a level payment loses purchasing power over 20 or 30 years. This tool shows the gross, pre-tax, nominal payout, so treat it as an upper bound, not your spendable income.
- Using the accumulation rate for the payout phase. The rate that grows the balance before retirement may differ from the rate the insurer credits during payout. Enter the rate that actually applies while the money is being distributed, not the growth rate you saw during accumulation.
Glossary
- Annuity payout phase
- The distribution stage of an annuity, when the accumulated balance is paid back to you as regular income rather than growing.
- Fixed-period annuity
- Also called period-certain: an annuity that pays a level amount for a set number of years and then ends, regardless of how long you live.
- Lifetime annuity
- An annuity that pays income for as long as you live, priced using mortality assumptions rather than a fixed term.
- Principal
- The starting balance being converted into income during the payout phase.
- Periodic rate
- The interest rate for a single payment period, equal to the annual rate divided by the number of payments per year.
- Level payment
- An equal payment made every period, calculated so the balance reaches exactly zero at the end of the term.
Frequently asked questions
How much does a $500,000 annuity pay per month?
A $500,000 balance earning 5% paid out over 20 years produces about $3,299.78 per month, or $791,946.89 in total. The exact figure depends on the interest rate and the payout period: a higher rate or a shorter term raises the monthly payment, while a lower rate or a longer term reduces it. This is a fixed-period estimate, not a lifetime income quote.
How is an annuity payout calculated?
The level payout uses the annuity formula PMT = P * r / (1 - (1 + r)^-n), where P is the starting balance, r is the annual rate divided by payments per year, and n is years times payments per year. When the rate is zero, it simplifies to P / n. The formula sizes each payment so the balance is exactly depleted at the end of the term.
What is the difference between the accumulation and payout phases?
The accumulation phase is when you fund the annuity and the balance grows with interest or investment returns. The payout phase is when that balance is distributed back to you as income. This calculator models the payout phase of a fixed-period annuity, turning a known balance into a level stream of payments over the years you choose.
Does this calculator model a lifetime annuity?
No. It models a fixed-period (period-certain) annuity that pays for exactly the number of years you enter and then stops. A lifetime annuity pays for as long as you live and is priced with mortality tables and insurer assumptions, so its payout cannot be reproduced by a simple formula. Use this tool for fixed-term drawdowns and insurer quotes for lifetime income.
Why is the total paid out more than my principal?
Because the money that has not yet been paid keeps earning interest during the payout period. That interest is added to your payments, so the total you receive over the term is larger than the starting balance. The difference between the total paid out and your principal is the total interest earned, which this calculator shows directly.
Is the annuity payout shown here before or after tax?
The payout shown is gross and pre-tax. It does not subtract product fees, rider charges, or income tax, and it does not adjust for inflation. Real annuity income is often partly taxable and loses purchasing power over long terms, so treat this figure as an upper-bound estimate and confirm your net income with a licensed advisor or tax professional.
Sources
- What is an annuity? , Consumer Financial Protection Bureau
- Present Value of an Annuity: Meaning, Formula, and Example , Investopedia