Annuity Payout Calculator

Free Online Annuity Payout Calculator

This annuity payout calculator works out how much you can withdraw on a regular basis from a lump sum, without running out of money before the end of your chosen term. Enter your starting balance, an expected interest rate, how long you want the payouts to last, and how often you want to get paid. The calculator instantly returns the exact periodic payout amount, along with a year-by-year chart showing how the balance draws down over time.

This is the reverse of a typical savings calculator. Instead of asking how a lump sum grows from contributions, it asks how a lump sum can be safely paid out in equal installments until it reaches zero — or any target balance you choose — by the end of the term. That makes it useful for anyone comparing a fixed annuity payout quote from an insurance company, planning a retirement withdrawal strategy, or working out a structured settlement or pension buyout payment schedule. Beyond the basic payout math, this tool also supports a growing payout that increases every year, a target ending balance so you can leave something behind, and an inflation-adjusted view of your final year's payment.

What Is an Annuity Payout?

An annuity payout is a series of equal (or gradually increasing) payments made from a lump sum over a set period, where the remaining balance keeps earning interest between payments. This is the standard shape of a fixed annuity income product sold by insurance companies, but the same math applies to any situation where a lump sum needs to be converted into a steady stream of income — a retirement account being drawn down in retirement, a lottery or legal settlement paid out over time, or a pension fund being converted into a monthly benefit.

The core question this calculator answers is: given a starting balance, an interest rate, and a fixed number of years, exactly how much can be withdrawn each period so the money lasts the whole term (and ends at exactly the balance you want, including zero)?

Annuity Payout Formula

For a level (non-growing) payout that fully depletes the balance, the standard present value of an annuity formula is rearranged to solve for the payment:

PMT = PV × r / (1 − (1 + r)^−n)

For an annuity due, where each payment is made at the start of the period instead of the end, the payout is slightly smaller for the same balance, since each payment has one extra period to earn interest:

PMT = [PV × r / (1 − (1 + r)^−n)] / (1 + r)

• PMT = the periodic payout amount
• PV = present value, the starting lump sum
• r = interest rate per period (annual rate divided by the number of payouts per year)
• n = total number of payout periods (years × payouts per year)

How This Calculator Finds Your Payout Amount

When you add a growing payout or a target ending balance, the plain formula above no longer applies directly, so this calculator solves the payout numerically instead. It works by testing a payout amount, simulating the balance period by period — applying interest, then subtracting the payout — across the entire term, and checking where the balance lands at the end. It repeats this search, narrowing in step by step, until it finds the exact payout that leaves the balance at your target (zero, by default) right at the end of the term. This approach handles a fixed payout, a yearly growing payout, and any ordinary or due timing, without needing a different formula for each case.

Worked Example — Calculating an Annuity Payout

Say you have a $250,000 lump sum, a 5% annual interest rate, and you want monthly payouts over 20 years, fully depleting the balance to zero by the end (an ordinary annuity, paid at the end of each month).

• Monthly rate: 5% ÷ 12 ≈ 0.4167% per month.
• Total periods: 20 years × 12 = 240 months.
• Applying the formula gives a monthly payout of roughly $1,649.
• Over 240 months, total payouts add up to about $395,760.
• Since only $250,000 was the starting balance, the remaining roughly $145,760 came entirely from interest earned along the way — the balance kept working for you even as it was being paid down.

Ordinary Payout vs. Annuity Due

As with the accumulation side of an annuity, timing matters here too. In an ordinary annuity payout, each payment is made at the end of the period, meaning the balance earns a full period of interest before that payment is subtracted. In an annuity due payout, each payment is made at the start of the period instead, so the balance earns interest on a smaller amount for that stretch — the money is paid out before it has a chance to earn as much.

The practical effect is that, for the same starting balance, rate, and term, an ordinary annuity typically supports a very slightly higher payout than an annuity due. It's a small difference per period, but insurance quotes and retirement plans do specify this timing explicitly, so matching the setting on this calculator to your actual payout schedule keeps the numbers accurate.

How Payout Frequency Affects the Amount

Choosing monthly, quarterly, semi-annual, or annual payouts changes both the size of each individual payment and, very slightly, the total amount paid out over the full term. More frequent payouts mean smaller individual payments, since the same balance is being spread across more periods, but the balance also has less time to compound between payments, which very slightly reduces total interest earned compared to less frequent payouts. This calculator lets you switch frequencies instantly to compare how a monthly income stream differs from an annual lump-sum-style payout on the exact same starting balance.

Fixed Payout vs. Growing Payout — An Advanced Feature

A flat payout that never changes loses purchasing power every year as prices rise. This calculator includes an optional annual payout increase, similar to a cost-of-living adjustment, so the payout you receive in year ten is larger than what you received in year one. Turning this on means the calculator solves for a smaller starting payout than a flat plan would give, since the total amount paid out over the term still needs to fit within the same starting balance and interest rate — but the payout keeps pace with rising costs instead of staying static.

Leaving a Balance Behind — Another Advanced Feature

Not everyone wants their annuity to hit exactly zero at the end of the term. This calculator includes an optional desired ending balance field, so you can plan for a payout that fully uses most of the balance but leaves a set amount behind — for an inheritance, an emergency reserve, or simply a safety margin. Setting this to zero (the default) gives the maximum possible payout for a full depletion plan; setting it higher automatically reduces the payout amount so that cushion is preserved by the end of the term.

Adjusting for Inflation — Understanding Real Purchasing Power

A payout that looks larger in later years, especially with a growing payout turned on, isn't automatically worth more in real terms — inflation eats into that growth too. This calculator includes an optional expected inflation rate that converts your final year's payout into today's purchasing power, so you can see whether your growing payout is actually keeping up with rising prices or falling behind them. This is particularly useful for long retirement payout terms of twenty years or more, where inflation's effect compounds just as much as interest does.

Where Annuity Payout Calculations Are Used

Annuity payout math shows up wherever a lump sum needs to become a stream of income. Insurance companies use it to price fixed annuity payout contracts. Retirement accounts use the same logic when planning systematic withdrawals designed to last a set number of years. Structured settlements from legal cases and lottery winnings paid out over time both follow this exact model, as do pension buyout offers that convert a pension into either a lump sum or a stream of guaranteed payments. Understanding this formula helps you check whether a payout quote you've been offered actually lines up with the numbers.

Common Mistakes When Calculating Annuity Payouts

A frequent mistake is assuming the payout should simply be the starting balance divided evenly by the number of periods, which ignores the interest the balance keeps earning along the way and results in a payout estimate that's too low. Another common error is mixing up ordinary and due timing, which throws off the payout by a small but real amount. It's also easy to forget that a flat payout loses real value to inflation every year, especially over a payout term stretching across two or three decades. Running the numbers through a calculator that accounts for compounding, timing, and inflation all at once avoids all three of these mistakes at the same time.

Why Use This Annuity Payout Calculator?

This tool solves the periodic payout for a real annuity payout scenario, with support for ordinary or due timing, an optional yearly growing payout, a target ending balance, and an inflation-adjusted view of your final payment — all in one place. You get an instant payout amount, a full year-by-year balance chart and table, and a downloadable CSV breakdown, so whether you're comparing a fixed annuity payout offer, planning a retirement withdrawal schedule, or estimating a structured settlement payment, you get an accurate, clear answer in seconds instead of working through the formula by hand.