What will my annuity payout be?
Enter a starting balance and the rate it earns. See how much each payout can be for the years you choose, or how long a payout of your choice lasts.
- Each payout
- $1,649.89
$250,000.00 earning 5% a year pays out $395,973.44 in 240 payouts over 20 years.
- The money lastsYears
- 20
- Number of payouts
- 240
- Total paid out
- $395,973.44
- Interest earned
- $145,973.44
- Months
- 240
Each payout: $1,649.89. $250,000.00 earning 5% a year pays out $395,973.44 in 240 payouts over 20 years.
How does the balance run down?
What is paid out each year?
What does each year look like?
The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use
How to calculate
Computes the level payout a balance can pay for a number of years while it keeps earning interest, or how long a chosen payout lasts.
Example with the default inputs (Starting balance $250,000.00, Yearly interest rate 5%, What do you want to find? The payout, Pay out for (years) 20, How often? Monthly, Payouts are made at the End of each period): $250,000.00 earning 5% a year pays out $395,973.44 in 240 payouts over 20 years.
Method: payout = P × r ÷ (1 − (1 + r)^−n), divided by (1 + r) when payouts are at the start, with r = yearly rate ÷ payouts a year; for a chosen payout, n = −ln(1 − P × r ÷ payout) ÷ ln(1 + r).
- The balance earns the same rate for the whole time, at the yearly rate divided by the payouts a year.
- All payouts are the same size, except a smaller last one when the balance runs out part way.
- Fees, taxes, and surrender charges are not included.
- This is not a lifetime annuity quote: insurers price those with life expectancy tables and their own rates.
- This is an estimate for planning, not financial advice.
Worked examples
Each example is checked against the calculator on every build.
- Starting balance $250,000.00, Yearly interest rate 5%, What do you want to find? The payout, Pay out for (years) 20, How often? Monthly, Payouts are made at the End of each period gives Each payout $1,649.89, Number of payouts 240, Total paid out $395,973.44.Source: level payout formula, hand calculation in content.mdx
- Starting balance $100,000.00, Yearly interest rate 6%, What do you want to find? The payout, Pay out for (years) 10, How often? Yearly, Payouts are made at the Start of each period gives Each payout $12,817.73.Source: annuity due: P × r ÷ ((1 − (1 + r)^−n) × (1 + r)); hand calculation in content.mdx
- Starting balance $100,000.00, Yearly interest rate 0%, What do you want to find? How long it lasts, Each payout $1,500.00, How often? Monthly, Payouts are made at the End of each period gives Number of payouts 67, The money lasts 5.583333, Last payout $1,000.00, Total paid out $100,000.00.Source: hand calculation in content.mdx: 66 payouts of $1,500 and a last one of $1,000
- Starting balance $200,000.00, Yearly interest rate 4%, What do you want to find? How long it lasts, Each payout $2,000.00, How often? Monthly, Payouts are made at the End of each period gives Number of payouts 122.Source: n = −ln(1 − P × r ÷ payout) ÷ ln(1 + r) = 121.84, so 122 payouts; hand calculation in content.mdx
How the payouts are worked out
The rate per payout is r = yearly rate ÷ payouts a year (12 monthly, 4 quarterly, 1 yearly), as a decimal.
Find the payout. With a balance P and n = years × payouts a year:
payout = P × r ÷ (1 − (1 + r)^−n)
or P ÷ n when the rate is 0. When payouts are at the start of each period, divide this by (1 + r).
Find how long a payout lasts. With a payout A at the end of each period, the number of payouts is n = −ln(1 − P × r ÷ A) ÷ ln(1 + r) (or P ÷ A at 0%). With payouts at the start, use P ÷ (1 + r) in place of P. If P × r ÷ A is 1 or more (A at the start: if A is no more than P × r ÷ (1 + r)), the money never runs out and there is no answer. It also has no answer if the money lasts more than 100 years.
Month by month (which gives the table and charts). The rows are months. The monthly rate is g = (1 + r)^(f ÷ 12) − 1 with f payouts a year, so the balance grows by exactly (1 + r) over each payout period. Payout months are every 12 ÷ f months: months 1, 2, 3, … for monthly payouts; for quarterly payouts at the end, months 3, 6, 9, …; at the start, months 1, 4, 7, ….
- Payouts at the end: each month, interest = balance × g is added; in a payout month the payout is then taken.
- Payouts at the start: in a payout month the payout is taken first; then interest = balance × g is added on the rest.
- The last payout is whatever is left: the last of the n payouts when you find the payout, or, for a chosen payout, the first payout month in which what is left is no more than one payout (within a billionth of it). The table stops at that month.
The results:
- Each payout (when you find the payout).
- The money lasts = number of payouts ÷ payouts a year, in years. Number of payouts counts the payouts, including a smaller last one.
- Total paid out adds every payout. Interest earned is the total paid out minus the starting balance.
- Last payout (when you choose the payout) is the final, often smaller, payout.
Assumptions
- The rate stays the same for the whole time.
- Fees, taxes, and surrender charges are not included.
- This is an estimate for planning, not financial advice.
Worked examples by hand
$250,000 at 5% a year, paid monthly for 20 years, at the end of each month. r = 0.05 ÷ 12 = 0.0041667 and n = 240. (1 + r)^−240 = 0.368645. Payout = 250,000 × 0.0041667 ÷ 0.631355 = $1,649.89. 240 payouts total $395,973.44, so the interest earned is $145,973.44.
$100,000 at 6%, paid yearly for 10 years, at the start of each year. r = 0.06 and n = 10. 1.06^−10 = 0.558395. At the end of each year the payout would be 100,000 × 0.06 ÷ 0.441605 = $13,586.80. At the start it is 13,586.80 ÷ 1.06 = $12,817.73.
$100,000 at 0%, $1,500 a month. 100,000 ÷ 1,500 = 66.67, so there are 66 payouts of $1,500 ($99,000) and a last one of $1,000: 67 payouts, which is 67 ÷ 12 = 5.58 years.
$200,000 at 4%, $2,000 a month at the end of each month. r = 0.04 ÷ 12 = 0.0033333. P × r ÷ A = 200,000 × 0.0033333 ÷ 2,000 = 0.333333. n = −ln(0.666667) ÷ ln(1.0033333) = 0.405465 ÷ 0.003327790 = 121.84, so there are 122 payouts (the last one smaller), about 10.2 years.
Other questions people ask
How is an annuity payout calculated?
The payout is the level amount that uses up the balance exactly over the number of payouts, while the rest keeps earning interest: payout = P × r ÷ (1 − (1 + r)^−n), where P is the balance, r the rate per payout, and n the number of payouts. $250,000 at 5% a year, paid monthly for 20 years, pays $1,649.89 a month.
What if the payout is less than the interest?
Then the balance never runs out: each payout is covered by the interest alone. With $200,000 at 4% a year, the first month’s interest is $666.67, so any monthly payout of $666.67 or less lasts forever, and the calculator says so.
Is this the same as buying a lifetime annuity?
No. This calculator pays out a balance over a fixed number of years, or until it runs out. A lifetime (life-contingent) annuity from an insurer pays for as long as you live, and the insurer sets the payment from life expectancy tables, its own rates, and fees. Ask for a quote to compare.
What is the difference between payouts at the start and at the end?
At the end, the first payout is one period from now, and the balance earns a full period of interest first. At the start, the first payout is today. Payouts at the start are smaller by a factor of (1 + r), because each one leaves the balance a period earlier.
What are the risks of annuities?
The SEC’s investor site notes that annuities can carry surrender charges if you take money out early, fees, and, for variable annuities, investment risk. Payments from an insurer depend on the insurer’s ability to pay. Read the contract and prospectus before you buy.