# What will my annuity payout be?

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.

- Page: https://www.acalculator.org/finance/annuity-payout-calculator
- JSON spec: https://www.acalculator.org/finance/annuity-payout-calculator.json
- Version: 68ce92203504

## Default answer

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.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| principal | Starting balance | The amount the payouts come from, for example the value of an annuity or savings. |
| rate | Yearly interest rate | The yearly rate the balance earns. The rate per payout is this divided by the payouts a year. |
| find | What do you want to find? | The payout for a number of years, or how long a payout you choose lasts. |
| years | Pay out for (years) | How many years the payouts last. |
| payout | Each payout | The amount of each payout. |
| freq | How often? | How many payouts a year: monthly (12), quarterly (4), or yearly (1). |
| when | Payouts are made at the | End of each period, so the first payout is one period from now, or the start, so the first payout is now. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| payment | Each payout | The level payout that uses up the balance over the years you chose. |
| lasts | The money lasts | How many years of payouts: the number of payouts divided by the payouts a year. |
| payouts | Number of payouts | How many payouts are made, including a smaller last one. |
| total | Total paid out | Every payout added up. |
| interest | Interest earned | The total paid out minus the starting balance. |
| last | Last payout | The final payout, which is smaller when the balance runs out part way. |

## 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).

## Assumptions

- 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

1. principal = $250,000.00, rate = 5%, find = amount, years = 20, freq = 12, when = end gives payment = $1,649.89, payouts = 240, total = $395,973.44. Source: level payout formula, hand calculation in content.mdx.
2. principal = $100,000.00, rate = 6%, find = amount, years = 10, freq = 1, when = start gives payment = $12,817.73. Source: annuity due: P × r ÷ ((1 − (1 + r)^−n) × (1 + r)); hand calculation in content.mdx.
3. principal = $100,000.00, rate = 0%, find = length, payout = $1,500.00, freq = 12, when = end gives payouts = 67, lasts = 5.583333, last = $1,000.00, total = $100,000.00. Source: hand calculation in content.mdx: 66 payouts of $1,500 and a last one of $1,000.
4. principal = $200,000.00, rate = 4%, find = length, payout = $2,000.00, freq = 12, when = end gives payouts = 122. Source: n = −ln(1 − P × r ÷ payout) ÷ ln(1 + r) = 121.84, so 122 payouts; hand calculation in content.mdx.

## FAQ

### 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.

## Sources

- U.S. Securities and Exchange Commission, Investor.gov: Annuities. https://www.investor.gov/introduction-investing/investing-basics/investment-products/insurance-products/annuities
- Present value of an annuity immediate and an annuity due: S. A. Broverman, Mathematics of Investment and Credit, chapter 2.