How to use the annuity payout calculator
The calculator turns a lump sum into regular payments, with the money not paid out yet still earning interest. Enter the starting principal, the yearly interest or return rate and how often you want to be paid, then pick what to solve for:
- Fixed length: enter the number of years. The calculator finds the payout that uses up the money exactly over that time.
- Fixed payment: enter the payout you want. The calculator finds how long the money lasts.
The results show the payout or the length, the total of all payouts, how much of it is interest, a balance graph and a year-by-year schedule you can export as CSV or PDF.
Annuity payout formula
For a fixed length, the payout is PMT = PV × i ÷ (1 − (1 + i)−n), where PV is the starting principal, i the rate per payout period and n the number of payouts. For a fixed payment, the number of payouts is n = −ln(1 − PV × i ÷ PMT) ÷ ln(1 + i). The rate per period is the one that compounds to the yearly rate: 6% a year is 0.4868% a month. Payouts are made at the end of each period.
Annuity payout example
$500,000.00 earning 6% a year, paid out monthly over 10 years, gives $5,511.20 a month. The 120 payouts add up to $661,344.16, of which $161,344.16 is interest. Taking $5,000.00 a month instead, the same money lasts 11.45 years. These are the default inputs of the calculator.
| Paid out over | Monthly payout | Total interest |
|---|---|---|
| 5 years | $9,629.49 | $77,769.49 |
| 10 years | $5,511.20 | $161,344.16 |
| 15 years | $4,176.47 | $251,764.69 |
| 20 years | $3,536.46 | $348,750.48 |
| 25 years | $3,173.10 | $451,931.27 |
| 30 years | $2,946.85 | $560,866.75 |
A longer payout lowers each payment but earns more interest in total, because the money stays invested longer.
Payout frequency
The same $500,000.00 over 10 years at 6% pays:
| Frequency | Each payout |
|---|---|
| Annually | $67,933.98 |
| Semiannually | $33,472.22 |
| Quarterly | $16,614.21 |
| Monthly | $5,511.20 |
| Semimonthly | $2,752.26 |
| Biweekly | $2,540.31 |
How long will an annuity last?
The money lasts until the payouts use up the balance and the interest it earns. If each payout is no more than the interest of a period, the balance never falls: $500,000.00 at 6% earns $2,433.78 a month, so any monthly payout up to that amount lasts forever. Above it, the balance falls a little faster each month.
Annuity payout in Excel
- Fixed length:
=PMT((1+6%)^(1/12)-1, 120, -500000)returns $5,511.20. - Fixed payment:
=NPER((1+6%)^(1/12)-1, -5000, 500000) / 12returns 11.45 years.
Period certain or lifetime annuity
This calculator shows a period certain payout: a balance you hold, paid out over a set time or at a set amount, with whatever is left going to your heirs. A lifetime annuity bought from an insurance company pays as long as you live, however long that is, and the insurer prices it on life expectancy and interest rates. A joint lifetime annuity keeps paying the surviving spouse. Lifetime income removes the risk of outliving your money but usually leaves nothing to heirs. A pension works the same way; the pension calculator compares a lifetime pension with a lump sum.
Taxes on annuity payouts
With an annuity bought with after-tax money, each payout is part return of your own money, which is not taxed, and part earnings, which are taxed as income. With pre-tax money, such as an IRA or a 401(k), the whole payout is taxed as income, and from your seventies the IRS requires minimum withdrawals; the RMD calculator shows how much. The calculator shows amounts before tax.
Similar calculators
- The annuity calculator covers the saving phase: how much a principal and regular additions grow to.
- The retirement calculator works out a withdrawal that rises with inflation, and how much you need to save for it.
- The Social Security calculator shows when to claim the benefit that adds to your payouts.