Annuity Payout Calculator
This annuity payout calculator works backward from a lump sum to tell you how much fixed monthly income it can provide over a chosen number of years while the remaining balance keeps earning interest. It treats your starting balance as the present value of an annuity and solves for the level monthly withdrawal that drains the account to zero at the end of the payout period. Alongside the monthly payout it reports the total dollars you will receive and how much of that came from interest earned during the payout.
Formula
PMT = PV · r / (1 − (1 + r)^−n)
- PMT
- Monthly payout amount
- PV
- Starting account balance being annuitized
- r
- Monthly rate = (annual rate ÷ 12) ÷ 100
- n
- Total number of monthly payouts = years × 12
How it works
- Enter the account balance you are annuitizing, the annual interest rate the balance earns, and the number of years over which you want to receive payouts.
- The calculator converts the payout horizon to months and the annual rate to a monthly rate, then solves the present-value annuity formula for the constant monthly payment that exhausts the balance.
- It reports the monthly payout, the total payout (monthly amount times the number of months), and the interest earned, which is the total payout minus your original balance.
Worked example
A $500,000 balance paid out over 20 years while earning 5% annual interest.
- Months n = 20 × 12 = 240; monthly rate = (5 ÷ 12) ÷ 100 = 0.0041667.
- PMT = 500,000 × 0.0041667 ÷ (1 − 1.0041667^−240) = $3,299.78 per month.
- Total payout = 3,299.78 × 240 = $791,947.20; interest earned = 791,947.20 − 500,000 = $291,947.20.
The annuity pays about $3,299.78 per month for 20 years, distributing roughly $791,947.20 in total, of which about $291,947.20 is interest earned on the declining balance.
Frequently asked questions
- How is this different from the annuity calculator?
- The annuity calculator values a known stream of payments to find present or future value. This payout tool does the reverse: it starts from a balance you already have and solves for the largest level monthly income that fully depletes it over your chosen period.
- Does the balance run out at the end of the payout period?
- Yes. The payment is sized so the account reaches zero after the final scheduled payout. Each month interest is added to the remaining balance, and the fixed withdrawal gradually consumes both that interest and the principal.
- Are taxes, fees, or inflation factored in?
- No. The payout is a level nominal amount before any income tax, insurer fees, or inflation adjustment. Because payments are fixed, their real purchasing power declines over time as prices rise.