Annuity Payout Calculator
↻ Updated 2026See the level monthly income a lump sum can generate over a fixed payout period, and how much of the total is interest versus your original principal.
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Runs entirely in your browser — nothing you enter is sent to us.How this works
How to read your annuity payout
This is a mortgage run backwards: instead of borrowing a lump sum and paying it off, you hand one over and get paid off. The monthly figure is a level payment that exactly exhausts the balance over your chosen period, and the interest number is what the unpaid balance earns while it waits.
How a lump sum converts into monthly annuity income
The standard annuity payment formula — the same one that prices a fixed-rate loan. Solve for the level monthly payment whose present value, discounted at the credited rate, equals the lump sum you handed over.
Each payment is part principal and part interest, and the mix shifts across the term. Early payments are mostly interest on a large balance; later ones are mostly the return of your own money.
r = annual rate ÷ 12 n = payout years × 12 monthly = lump sum × r ÷ (1 − (1 + r) ^ −n) total paid = monthly × n interest earned = total paid − lump sum
- lump sum
- The amount you hand to the insurer — the present value the payments are solved against
- annual rate
- The rate the insurer credits your unpaid balance — already net of the insurer's margin in a real quote — you don't see it separately
- payout years
- How long the payments run — a fixed term — this is the period-certain assumption
- r
- The monthly rate — a simple twelfth of the annual rate, not a compounded equivalent
- n
- The total number of monthly payments — 240 at the defaults
- monthly
- The level payment that exhausts the balance exactly at term — identical every month — no inflation adjustment
The word doing the most work is "period-certain". A real immediate annuity is usually sold on a life contingency: the insurer pays until you die, pooling your longevity risk with everyone else's. That's the product's actual purpose, and it's the thing this formula cannot price — there's no mortality table here, no age input, nothing about how long you might live. What the calculator prices is the simpler cousin: a guaranteed term, which pays your beneficiary the remainder if you die early and pays nothing at all if you outlive the term. Compare the defaults to the market: $500,000 at 65 typically quotes around $2,750 to $3,250 a month for single life, against $3,300 here for 20 years certain.
Worked examples
Example: $500,000 over 20 years at 5%
The calculator's defaults. You annuitise half a million dollars, the insurer credits the unpaid balance 5% a year, and payments run for 240 months.
| Monthly rate5% ÷ 12 | 0.4167% |
| Number of payments20 years × 12 | 240 |
| Monthly income$500,000 × 0.004167 ÷ (1 − 1.004167 ^ −240) | $3,300 |
| Annual income7.9% of the original lump sum | $39,597 |
| Total paid outover the full term | $791,947 |
| Interest earned37% of everything you receive | $291,947 |
| Balance at month 241by construction — the term ends, the money ends | $0 |
$3,300 a month, of which $291,947 across the term is interest and $500,000 is your own capital coming home. That 7.9% annual income looks generous next to a 4% withdrawal rule until you notice why: this plan is designed to hit zero. The 4% rule is designed not to.
Example: the same $500,000 stretched over 30 years
Only the payout period changes — 30 years instead of 20, same lump sum, same 5% credited rate. The trade-off between the size of the check and the length of the guarantee, in dollars.
| Number of paymentsup from 240 | 360 |
| Monthly incomedown $616, or 19% | $2,684 |
| Total paid outup $174,332 | $966,279 |
| Interest earnedup $174,332 — the balance sits longer, earning longer | $466,279 |
| Payments per dollar of monthly incomethe whole trade | +50% term for −19% check |
Half again as long for a check 19% smaller. That asymmetry is the time value of money working for you — the unpaid balance keeps earning 5%, so stretching the term costs proportionally less than it buys. It's also why a lifetime annuity for someone with a long life expectancy pays less per month than one for someone older.
Frequently asked questions
How much does a $500,000 annuity pay per month?
At this calculator's defaults — 5% credited, 20-year term certain — $3,300 a month, $791,947 in total. Real-world single-life immediate annuity quotes for $500,000 tend to run roughly $2,450 to $2,900 a month starting at 60, $2,750 to $3,250 at 65, and $3,200 to $3,650 at 70, according to published rate surveys.
The pattern in those numbers is the thing this calculator can't show you: payments rise with your age at purchase, because the insurer expects to pay for fewer years. A period-certain quote has no age in it at all. The two products are close in monthly dollars and completely different in what they guarantee — one runs out at a date you picked, the other runs out when you do.
What happens to my annuity money when I die?
It depends entirely on the payout option you chose when you bought it, and this is where the largest amounts of money go missing. Life-only pays the highest monthly income and stops dead at your death — the insurer keeps the balance and your beneficiaries get nothing. Period certain, which is what this calculator models, pays the remainder of the term to your beneficiary. Joint and survivor keeps paying while either spouse lives, for a smaller check.
If you haven't annuitised yet — money still accumulating in a deferred contract — beneficiaries generally receive the current account value as a lump sum or in instalments. The trade is consistent throughout: every guarantee you add to protect your heirs is paid for out of your own monthly income.
Are annuities a good investment for retirement?
An annuity isn't really an investment — it's insurance against outliving your money, and it should be judged that way. What it buys is the removal of longevity risk, which no portfolio strategy can eliminate: a 4% withdrawal plan can fail if you live to 100, and a lifetime annuity cannot.
What you give up is control, liquidity and upside. Annuitised money is gone as a balance — you can't change your mind, you can't leave it to anyone unless you paid for that guarantee, and it won't participate in a good decade. Surrender charges and rider costs are real, and a formal illustration will show numbers this calculator's clean 5% never will. Fee structures vary widely across products; the retirement number calculator shows what the same lump sum has to do if you keep it invested instead.
How are annuity payments taxed?
It turns on where the money came from. A qualified annuity — bought inside an IRA or 401(k) with pre-tax dollars — has every payment taxed in full as ordinary income, because none of it has ever been taxed. That's the case where this calculator's $3,300 is materially less in your hand than it looks.
A non-qualified annuity, bought with money you'd already paid tax on, splits each payment using an exclusion ratio: the portion representing your original principal comes back tax-free and only the earnings are taxed, until your basis is exhausted — after which everything is ordinary income. Withdrawals of gains before 59½ can also draw a 10% penalty. The mechanics are set out in IRS Publication 575 and Topic 410. Note that annuity gains are ordinary income either way, never capital gains.
What this annuity calculator can't price
The formula is exact and the product it describes is simpler than what insurers actually sell. Every gap below runs in the same direction: real quotes pay less than clean arithmetic.
- No mortality, no lifetime option — There's no age field, because a fixed term doesn't need one. Lifetime annuities — the reason most people buy an annuity at all — are priced off mortality tables and gender, and this model has neither. It cannot answer the question the product exists to answer.
- No inflation — The payment is level for the whole term. At 3% inflation, the $3,300 check in year 20 buys about $1,827 of today's spending. Real inflation-linked annuities exist and start considerably lower.
- The credited rate is a clean assumption — A real quote embeds the insurer's expenses, margin and mortality assumptions inside one payout figure — you never see a 5% rate stated separately. Surrender charges, rider fees and market-value adjustments sit outside this model entirely.
- No tax — The output is gross. A qualified annuity is fully taxable as ordinary income; a non-qualified one is taxed on the earnings portion via an exclusion ratio (IRS Publication 575).
- No insurer risk — The payments are treated as certain. They're an insurance company's obligation, backed by state guaranty associations up to limits that vary by state — not by a federal guarantee.
- ·U.S. SEC — Annuities (Investor.gov) — Payout modeled with standard present-value / amortization math
Rates, brackets and limits here are checked against primary sources. If a number still looks off, email support@realmoneyiq.com and we'll review and fix it.
RealMoneyIQ provides free educational calculators, not financial, tax, investment or legal advice. Results are estimates based on the assumptions you enter and publicly published rates; your actual outcome will differ. Always confirm decisions with a licensed professional who knows your full situation.