Annuity Payout Calculator
Estimate how much you can withdraw from your annuity or how large a balance you need for a target payout, with inflation-adjusted results.
What the annuity payout calculator does
The annuity payout calculator works in two directions. If you know the balance in an annuity or retirement account, it tells you how much you can withdraw each month, quarter or year for a chosen number of years at a given interest rate. If you know the payout you want, it tells you how large a balance you need. Choose the mode, enter the balance or the desired payout, the annual interest rate, the payment duration in years and the payment frequency, and press Calculate. An optional inflation rate shows the total of the payments in today’s purchasing power.
The formulas
With r the interest rate per period (annual rate ÷ periods per year) and n the total number of periods:
- Payout from a balance: PMT = balance × r(1 + r)n / ((1 + r)n − 1)
- Balance for a payout: balance = PMT × ((1 + r)n − 1) / (r(1 + r)n)
- If the rate is zero: PMT = balance ÷ n
This is the same annuity formula used for loan payments, seen from the other side: the account is the lender and you are the borrower repaying yourself. The balance is exhausted exactly at the end of the period.
Worked examples
| Balance | Rate | Years | Frequency | Payout | Total paid out |
|---|---|---|---|---|---|
| $500,000 | 5% | 25 | Monthly | $2,923 | $877,000 |
| $500,000 | 5% | 25 | Yearly | $35,476 | $887,000 |
| $250,000 | 4% | 20 | Monthly | $1,515 | $364,000 |
| $1,000,000 | 6% | 30 | Monthly | $5,996 | $2,158,000 |
| $300,000 | 0% | 15 | Monthly | $1,667 | $300,000 |
In the required-balance direction, a $2,000 monthly payout for 25 years at 5% needs $342,000. Interest earned on the declining balance funds a large part of the payments, which is why the total paid out can be nearly double the starting balance.
Adjusting for inflation
A fixed payout buys less each year. At 3% inflation, $2,923 a month in year 25 has the purchasing power of about $1,396 today. The calculator’s inflation field discounts every payment back to today’s money and reports the real total. For the first example, a nominal total of $877,000 is worth roughly $600,000 in today’s dollars at 3% inflation. To keep purchasing power level, either plan for rising withdrawals, which the formula does not model, or use a lower effective rate: real rate ≈ nominal rate − inflation, so 5% nominal at 3% inflation is about a 2% real rate, which cuts the level real payout to about $2,120 a month.
Choosing the rate and duration
- Rate. Insurance-company annuities embed their own rate; for a self-managed drawdown use the expected return of the portfolio, typically 4 to 6% for a balanced mix. A lower rate is safer.
- Duration. Plan to age 90 or 95 rather than average life expectancy; half of people live longer than average. A 65-year-old should usually test 25 and 30 years.
- Frequency. Monthly payouts are slightly smaller than yearly ones divided by 12, because money leaves the account earlier and earns less.
Annuity payout versus the 4% rule
The 4% rule says a diversified portfolio can support an initial withdrawal of 4% of its value, rising with inflation, for 30 years with high probability. On $500,000 that is $20,000 a year, or $1,667 a month, and it leaves a buffer for bad markets. The annuity formula at 5% over 30 years gives $2,684 a month but assumes a constant return and spends the account to zero. Real returns vary; a run of poor years early in retirement can exhaust an account that the formula says should last. Treat the annuity figure as an upper bound and the 4% rule as the cautious floor.
Common mistakes
- Entering a monthly rate as the annual rate. The field wants the yearly figure.
- Using a portfolio’s best-year return. Assume a long-run average, minus fees.
- Ignoring taxes. Withdrawals from pre-tax accounts are taxable; the payout is gross.
- Planning to life expectancy. Running out of money at 85 is a real risk if you live to 95.
Related tools
The annuity calculator covers the accumulation phase and present value. The retirement savings calculator and 401(k) calculator project the balance you will start with, the RMD calculator shows the minimum withdrawals U.S. rules require, and the Social Security calculator estimates the income that reduces what your savings must provide. The inflation calculator shows how a fixed payout erodes.
External references
Frequently asked questions
Is the payout paid at the start or end of each period?
At the end (an ordinary annuity). Payments at the start would be slightly smaller for the same balance.
Does the balance reach zero at the end?
Yes. The formula spends the account exactly over the chosen duration. To leave a residual balance, shorten the duration or reduce the payout.
How does a higher rate change the payout?
Each extra 1% of annual return raises a 25-year monthly payout by roughly 10%.
Can I model a payout that rises each year?
Not directly. Use a real rate (nominal minus inflation) and read the result as a level payout in today’s money, which is equivalent to a nominal payout rising with inflation.
What is the difference between this and a life annuity from an insurer?
A life annuity pays for as long as you live, pooling longevity risk across many buyers, and its rate reflects the insurer’s costs. This calculator models a fixed-term drawdown from your own account.