An annuity payout calculator works out the level monthly income a lump sum can provide over a set number of years while the remaining balance keeps earning interest. Formula: n = years × 12. r = rate/100/12. Monthly payout = pv / n if r = 0; else pv × r / (1 – (1+r)^(-n)). Total payouts = payment × n. $250,000 earning 4% and paid out over 20 years gives about $1,514.95 a month.
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How to use the annuity payout calculator
- Enter the starting value of the annuity or savings.
- Enter the annual interest rate it will earn during the payout.
- Enter the number of years the payments should last.
- Read the monthly payout and total paid out.
What formula does the annuity payout calculator use?
- Monthly rate r = annual rate ÷ 12; number of payments n = years × 12
- Monthly payout = PV × r ÷ (1 − (1 + r)−n)
- At a 0% rate, payout = PV ÷ n
- Total payouts = monthly payout × n
This is the same formula a lender uses for a loan payment, turned around: the balance is the money you start with, and each payment is income to you. The balance earns the stated rate while it is paid out and reaches zero with the last payment.
Annuity payout calculator worked example
| Starting value | Rate | Years | Monthly payout | Total paid out |
|---|---|---|---|---|
| $250,000 | 4% | 20 | $1,514.95 | $363,588 |
| $250,000 | 4% | 30 | $1,193.54 | $429,674 |
| $250,000 | 5% | 20 | $1,649.89 | $395,973 |
| $500,000 | 4% | 20 | $3,029.90 | $727,176 |
| $250,000 | 0% | 20 | $1,041.67 | $250,000 |
| $100,000 | 4% | 10 | $1,012.45 | $121,494 |
$250,000 earning 4% and paid out over 20 years gives $1,514.95 a month, or about $363,588 in total. The extra $113,588 is the interest the remaining balance earns along the way. Stretching the same money to 30 years lowers the payout to $1,193.54.
Fixed-period payout vs lifetime income
The annuity payout calculator shows a fixed-period payout: the money lasts exactly the number of years you enter. An insurance company’s life annuity works differently. It pays for as long as you live, however long that is, and the insurer pools the risk across many buyers. Its quote depends on your age, sex, interest rates and options such as a payment for a surviving spouse or a guaranteed minimum period. A lifetime quote can be higher or lower than this fixed-period figure, so ask insurers for quotes rather than relying on the calculator for a product price.
Choosing the rate and the period
- Rate: use a rate you can reasonably expect after fees. A higher assumed rate gives a higher payout but more risk of running short if returns fall.
- Period: if the payout must last for retirement, choose a period longer than average life expectancy, since many people live well beyond the average.
- Inflation: a level payout buys less each year. At 3% inflation, a fixed monthly amount loses about a quarter of its buying power in 10 years.
Taxes on annuity income
How payouts are taxed depends on the source. Payments from a traditional IRA or 401(k) are generally taxed as ordinary income. For an annuity bought with after-tax money, part of each payment is a tax-free return of what you paid in. The calculator shows amounts before tax.
Estimates for education only, not financial advice. Your lender’s figures are final.
When returns are not steady
The annuity payout calculator assumes the same rate every year. Real investments rise and fall, and the order of those returns matters once withdrawals begin. A fall in the first few years of withdrawals does more damage than the same fall later, because money is being taken out while values are low and has less chance to recover. This is called sequence-of-returns risk. To allow for it, run the annuity payout calculator with a lower rate as a cautious case, keep a cash reserve for a year or two of spending, or cover essential costs with guaranteed income such as Social Security or a lifetime annuity from an insurer.
It also helps to review the plan each year. If the balance has grown faster than assumed, the payout can rise; if it has fallen, a small cut early is easier than a large one later.
Related converters and calculators
Related calculators:
- Annuity calculator: saving
- Retirement calculator: retirement
- Present value calculator: present value
- RMD calculator: withdrawals
Sources
Investor.gov (SEC): Annuities; Investor.gov (SEC): Compound interest calculator.
Questions about this calculator
How much does a $250,000 annuity pay per month?
About $1,514.95 over 20 years at 4%.
What formula is used?
Payout = PV × r ÷ (1 − (1 + r)^−n), with monthly r and n.
Is this a lifetime annuity quote?
No. It is a fixed-period payout; lifetime quotes come from insurers.
Does it account for inflation?
No. The payout is level; its buying power falls over time.
Is annuity income taxable?
Often, depending on how the annuity was funded.
Check the assumptions and units before relying on a result. Financial, tax and health estimates do not replace advice for your individual circumstances.
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