Annuity Payout Calculator

You've accumulated a lump sum — now you need to know how much monthly income it can provide. This annuity payout calculator shows exactly how much regular income a lump sum will generate over your chosen period.

What This Calculator Does

Given a lump sum amount, interest rate, and payout period, it calculates your monthly (or periodic) payment. It also shows total payouts and total interest earned vs. principal during the payout phase.

How to Use This Calculator

1. Enter the lump sum amount (the accumulated value you're starting with).
2. Enter the annual interest rate earned during payout.
3. Enter the payout period in years (e.g., 20 years, 30 years, or "lifetime" for permanent income).
4. Select payment frequency (monthly, quarterly, annually).
5. Click Calculate to see your periodic payment amount.

Payout Formula

PMT = PV × r / [1 − (1 + r)^(−n)]

Where PV = lump sum, r = period interest rate, n = total periods.

Example Calculation

Lump sum: $500,000 | Rate: 5% | Payout period: 25 years | Monthly

• Monthly payout: ≈ $2,923
• Total paid out: $877,000
• Interest earned during payout: $377,000

Lifetime vs. Fixed-Period Annuity

• Fixed period: Pays for exactly N years, then stops. Risk: outliving it.
• Lifetime: Pays as long as you live, regardless of how long. Insurance company bears longevity risk. Usually 10%–30% lower monthly payment than equivalent fixed-period annuity.

Common Mistakes to Avoid

• Assuming no taxes on payouts — Distributions from qualified accounts (IRA, 401k) are fully taxable. Non-qualified annuity payouts have only the earnings portion taxed.
• Not planning for inflation — A fixed $2,923/month loses purchasing power every year. Consider inflation-adjusted or stepped-up payout options.
• Choosing payout period that's too short — With average life expectancies in the mid-80s, plan for at least 25–30 years of payout from age 60.

Frequently Asked Questions

How much monthly income does $1 million generate?

At 5% over 25 years: about $5,846/month. At 4% over 30 years: about $4,774/month. For lifetime income (insurance annuity), rates vary by age — typically $4,500–$6,500/month for a 65-year-old in 2025.

Should I choose a fixed or variable annuity?

Fixed annuities guarantee a set payment regardless of market performance — great for security. Variable annuities fluctuate with investment performance — higher potential but more risk. Most retirees benefit from a mix.

What is the surrender period on an annuity?

Many insurance annuities have 5–10 year surrender charge periods where early withdrawal incurs a fee (often 7%–10% in year 1, declining annually). Avoid locking up money you may need soon.

How do I compare annuity offers from different insurance companies?

Compare the monthly payout per $100,000 of premium at the same age and payout type. Also check the insurer's financial strength rating (A.M. Best A+ or better recommended for life income annuities).

Conclusion

Knowing your monthly income from a given lump sum is the key planning bridge between your accumulation years and retirement spending. Use this calculator to model different scenarios and find the balance between monthly income, payout duration, and leaving something for heirs.

Related: Annuity Calculator | Retirement Calculator | Present Value Calculator | RMD Calculator