The annuity payout calculator answers the most common retirement question: "If I have $X saved, how much can I withdraw every month?" Enter your balance, interest rate, and how many years you need income, and the calculator shows your monthly payment, total received, and a full year-by-year schedule.
How Annuity Payouts Are Calculated
The payout formula is: PMT = PV × [r(1+r)^n] / [(1+r)^n − 1], where r is the periodic interest rate and n is the total number of payments. At 5% annually with monthly payments, r = 0.4167%. This formula ensures the balance reaches exactly zero at the end of the period — principal and interest are both consumed proportionally in every payment.
What Affects Your Monthly Payment?
Three variables drive the payout amount. A higher starting balance linearly increases your payment. A higher interest rate increases payments because the money earns more while sitting in the account. A shorter payout period increases payments because the same balance must be distributed over fewer years. The average American retiree needs to plan for 20–30 years of income, making the interest rate assumption particularly important — a 1% difference in rate on a $300,000 balance changes monthly income by roughly $150.
Period-Certain vs. Lifetime Payouts
This calculator models a period-certain payout — a fixed number of years. Insurance company lifetime annuities use a different calculation that accounts for life expectancy and mortality tables. For a 65-year-old, a lifetime annuity from an insurer typically pays slightly less per month than a 20-year period-certain, because the insurer bears the longevity risk. For a pure math comparison, use our immediate annuity calculator.
Frequently Asked Questions
How much does a $300,000 annuity pay per month?
At 5% annually over 20 years, a $300,000 annuity pays approximately $1,980/month. At 4%, it pays about $1,818/month. At 6%, about $2,149/month. The interest rate has a significant effect — locking in a higher rate during accumulation translates directly to higher monthly income. Use this calculator to model your exact scenario. See also our
fixed annuity calculator for rate comparisons.
What is the difference between an annuity payout and a pension?
A pension is a defined-benefit plan provided by an employer, guaranteeing a set monthly payment based on salary and years of service. An annuity payout is a product you purchase from an insurance company, converting a lump sum into income. Both provide regular payments, but annuities are purchased individually while pensions are employer-funded. Many retirees use annuities to replicate pension-style income when they don't have a traditional pension.
Can I outlive my annuity?
With a period-certain annuity, yes — if you live longer than the payout term, payments stop. That's the main limitation of this model. A lifetime annuity from an insurance company guarantees payments for as long as you live, regardless of how long that is. The trade-off is a slightly lower monthly amount. The average American woman reaching age 65 has a 50% chance of living past age 86, making longevity risk a real planning concern.
How is the payout taxed?
For non-qualified annuities (funded with after-tax money), only the interest portion of each payment is taxable — the principal returns tax-free. For qualified annuities (IRA or 401k rollover), the entire payment is ordinary income. The IRS exclusion ratio determines what percentage of each payment is tax-free for non-qualified annuities. Consult a tax professional for your specific situation, especially if rolling over a large qualified retirement account.