You have saved a lump sum for retirement — maybe $500,000 in a 401(k), a rolled-over IRA, or the proceeds of a pension buyout — and the real question is simple: how much monthly income can that money actually produce? This annuity payout calculator answers it directly. Enter your balance, the interest rate you expect, and how long you want payments to last, and it shows the monthly check, the annual income, the total you will receive over the whole payout period, and the interest that your remaining balance earns along the way.
A payout annuity works in reverse of a savings annuity. Instead of building a future balance from small regular deposits, it takes a known balance and drains it down to zero over a fixed number of months, while the money still invested keeps earning interest. The result is the same math a lender uses for a mortgage — just pointed the other direction.
How to Use
- Enter your Annuity Balance (Lump Sum) — the money you are converting into guaranteed income. This is the starting principal, not the monthly payment.
- Set your Interest Rate (APR). If you are buying a commercial annuity, use the insurer's credited rate; if you are self-managing withdrawals, use a conservative expected return, such as 4%, and stress-test the result at 3% and 5%.
- Choose your Payout Period in years — 5, 10, 15, 20, 25, or 30. This is how long you want monthly payments to continue before the balance reaches zero.
- Read the result card: Monthly Payout is the check you get every month, Annual Payout is times twelve, Total You Will Receive is every payment added up, and Total Interest Earned shows how much of that total came from investment growth rather than your own principal.
Shortening the payout period raises each monthly check but drains the savings faster; extending it lowers the check but keeps income flowing longer. Drag the sliders to compare trade-offs before you commit to any product.
The Payout Annuity Formula
The monthly payout comes from solving the level-payment annuity formula for the payment amount:
PMT = PV × r / (1 − (1 + r)⁻ⁿ)
Where:
- PMT is the monthly payout.
- PV is the starting balance (present value).
- r is the monthly interest rate — the annual APR divided by 12.
- n is the total number of monthly payments — the payout period in years times 12.
Worked example on a $500,000 balance at 4.0% APR over 20 years: the monthly rate is 0.04 / 12 = 0.003333, n = 240. Plugging in gives a monthly payout of $3,029.90, an annual income of about $36,359, and over 240 months you receive $727,176 in total — of which $227,176 is interest earned on the declining balance.
If the interest rate is 0%, the denominator formula still works, but the engine simply splits the principal evenly across the months: $500,000 over 240 months is $2,083.33 per month, with zero interest on top.
Why the Payout Period Matters
The single biggest lever on your monthly check is how long the annuity has to last. Compare three plans on the same $500,000 at 4%:
- 10-year payout — about $5,061 per month, but the money runs out in a decade.
- 20-year payout — about $3,030 per month, lasting to age 85 if you start at 65.
- 30-year payout — about $2,387 per month, covering a very long retirement.
Choosing a shorter period means spending principal aggressively; choosing a longer one lets interest do more of the work. Many retirees layer the two: a fixed 20-year annuity to cover essential spending, plus a longer-dated bucket to hedge against living past 90.
Examples
Example 1 — The classic retirement number. A 65-year-old retiree with a $500,000 IRA, a 4% expected rate, and a 20-year horizon sees a monthly payout of roughly $3,030 — about $36,360 per year, on top of Social Security. Over the full term the balance returns $727,176, because the untouched portion keeps earning while withdrawals happen.
Example 2 — A seven-figure nest egg. Someone with $1,500,000 at 5% over 25 years receives about $8,769 per month, totaling $2,630,655 over 300 months. The interest component — over $1.1 million — is what makes the withdrawal sustainable rather than simply drawing down savings.
Example 3 — A short bridge. A 62-year-old waiting for Social Security to start at 67 sets aside $250,000 for a 10-year payout at 6%. The calculator shows about $2,776 per month, totaling $333,062 — a five-year bridge funded mostly by principal, with interest cushioning the gap.
FAQ
How much monthly income will a $500,000 annuity pay?
At a 4% annual rate over 20 years, a $500,000 balance pays roughly $3,030 per month, or about $36,360 per year. The exact figure depends on your chosen rate and payout period: a 10-year payout rises to about $5,061 per month, while a 30-year payout falls to about $2,387 per month.
What is the difference between this and a regular annuity calculator?
A regular annuity calculator starts with a monthly payment and projects a future balance (saving up). This payout calculator starts with the lump sum you already have and solves for the monthly check that drains it to zero — the decumulation, or withdrawal, side of retirement planning.
What interest rate should I use?
For a commercial fixed annuity, use the insurer's quoted credited rate. For self-managed withdrawals, use a conservative expected return — 3% to 5% is a common range — and test the lower bound. A rate drop from 5% to 3% can cut your monthly payout by roughly 10%, so build in margin.
Does the monthly payout stay the same forever?
This calculator assumes a level (fixed) payout for a fixed term, which is how fixed-period and life-only commercial annuities are priced. Variable annuities, indexed annuities, and cost-of-living-adjusted (COLA) riders change the payment over time and are outside this model.
What happens if I live longer than the payout period?
With a fixed-term payout, the balance reaches zero at the end of the term and payments stop. To hedge longevity, consider a life-only or joint-life annuity, which pays until death regardless of how long that is, or stretch the payout period to 30 years in this calculator to see the smaller-but-longer alternative.
Are annuity payouts taxed?
Taxation depends on the money inside the annuity. Contributions from a traditional IRA or pre-tax 401(k) are fully taxable as ordinary income when withdrawn; contributions from a Roth or already-taxed savings are partly return of principal. Consult a tax professional for your specific situation.
Disclaimer
This annuity payout calculator is provided for informational purposes only and does not constitute financial, insurance, tax, or investment advice. Estimates are based on the inputs you enter and the standard level-payment annuity formula; actual annuity quotes vary by insurer, age, health, product features, fees, riders, and current interest rates. Figures are approximations and should not be relied upon as a guaranteed income quote. Always confirm payouts, fees, and surrender terms directly with a licensed insurance agent or financial advisor before purchasing an annuity.