Annuity Monthly Payout Calculator
Planning retirement income? This calculator uses the standard present-value annuity formula (PMT = PV·r / (1−(1+r)^−n)) to show exactly how much you can withdraw each month from a lump sum before it runs out. Enter your nest egg, the expected annual return your money earns during the payout phase, and how many years you need income — or work backward from a target age.
When to use this calculator
- Estimate monthly income from a pension lump-sum buyout
- Plan withdrawals from a 401(k) or IRA rollover through retirement
- Compare payout duration: 15, 20, or 30 years from the same principal
- Model how interest rate changes affect your monthly retirement check
- Determine whether a lump sum or annuity contract offers better value
- Project total interest earned during the drawdown phase
How it works
2 min readWhat is an annuity payout?
An annuity payout is a fixed monthly income amount withdrawn from a lump sum over a set period, calculated using present-value formulas. For example, a $500,000 principal earning 5% annually yields $2,387 monthly for 25 years. This ensures your nest egg lasts exactly as long as planned.
How It Works
This calculator applies the present-value ordinary annuity formula to compute a fixed monthly withdrawal that exactly depletes a lump sum over a chosen number of months, assuming a constant interest rate earned on the remaining balance.
Formula
PMT = PV × r_m / (1 − (1 + r_m)^(−n))
Where:
PV = present value (lump sum, $)
r_m = monthly interest rate = annual_rate / 12 / 100
n = total payment periods = payout_years × 12
PMT = fixed monthly payment ($)Special case — 0% interest: When annual_rate = 0, the formula simplifies to PMT = PV / n (straight division with no interest component).
Worked Example
| Input | Value |
|---|---|
| Lump sum (PV) | $500,000 |
| Annual rate | 5.00% |
| Monthly rate (r_m) | 0.41667% |
| Payout years | 25 (n = 300 months) |
PMT = 500,000 × 0.0041667 / (1 − (1.0041667)^(−300))
= 2,083.33 / (1 − 0.2872)
= 2,083.33 / 0.7128
≈ $2,922.06 / month(Note: exact value depends on full floating-point precision — use the calculator above for the precise figure.)
| Output | Value |
|---|---|
| Monthly payout | $2,922.06 |
| Total received (300 × PMT) | $876,617 |
| Interest earned | $376,617 |
Age-Based Mode
If you select Current age & target end age, the calculator computes payout_years = end_age − current_age. For example, starting payouts at age 65 and targeting age 90 gives 25 years — identical to typing 25 directly.
Limitations & When NOT to Use This Calculator
Frequently asked questions
What is an annuity payout?
An annuity payout is a series of equal periodic payments made from a principal sum. The principal earns interest on its remaining balance each period, which is why the total received can significantly exceed the original lump sum over long payout horizons.
What interest rate should I enter?
Use the net annual return you expect the principal to earn during the payout phase — after any product fees. For a fixed annuity contract, this is the declared rate. For a self-managed IRA withdrawal, a conservative estimate of 4–6% for a balanced portfolio is common in financial planning.
How many years should I plan for?
The Social Security Administration's 2024 period life table shows a 65-year-old male has a life expectancy of roughly 83 years, and a female about 86 years. Financial planners often recommend planning to age 90–95 to reduce longevity risk — the risk of outliving your savings.
What happens if I enter 0% as the interest rate?
At 0% the formula reduces to PMT = PV ÷ n (total months). For example, $300,000 over 20 years (240 months) at 0% = $1,250/month, and total received equals exactly the lump sum with zero interest earned.
Is this the same as a pension annuity from an insurance company?
The mathematics are the same, but insurance annuities also include mortality pooling (longevity credits from participants who die early), insurer profit margins, and administrative costs. This calculator models the pure mathematical payout; actual insurance quotes will differ.
How does inflation affect my monthly payout?
This calculator shows a nominal (not inflation-adjusted) payout. To approximate real purchasing power, subtract your expected annual inflation rate from the annual interest rate before entering it. For example, if you expect 5% returns and 3% inflation, enter 2% as the effective real rate.
Can I use this for a 401(k) or IRA withdrawal plan?
Yes — enter your account balance as the lump sum and your expected average net return during retirement. Be aware that traditional 401(k)/IRA distributions are taxed as ordinary income, so your net monthly income will be lower than the calculator shows. Required Minimum Distributions (RMDs) also impose a minimum withdrawal schedule from age 73 under current IRS rules.
What is the difference between total received and interest earned?
Total received = monthly payout × number of months. Interest earned = total received − original lump sum. This represents the cumulative interest credited to your account balance during the payout period before each withdrawal was made.
Does the payment timing matter (annuity-due vs. ordinary annuity)?
This calculator uses an ordinary annuity (payments at the END of each month), which is the standard for most retirement income products and bank accounts. An annuity-due (payments at the start of each month) produces a slightly lower PMT for the same inputs, because interest accrues for one fewer period.
What if I want to leave a residual balance at the end?
This calculator assumes the balance reaches exactly $0 at the final payment. If you want to preserve a legacy amount (e.g., $50,000 remaining), subtract that target balance from the lump sum before entering it. The calculator will then compute payouts based on depleting only the remainder.