Annuity Calculator
Turn a lump sum into a stream of monthly income — or find out how long your money lasts at the payment you want.
The annuity payout formula
where P is the lump sum, r the monthly rate, and n the number of monthly payments — the same math as a loan payment, with you as the lender.
$500,000 at 5% paid out over 25 years:
PMT = 500,000 × 0.004167 ÷ (1 − 1.004167−300) ≈ $2,923/mo
Total received: ≈ $877,000 — the extra $377,000 is interest the remaining balance keeps earning during payout.
Fixed-period math vs. insurer annuities
This calculator models a fixed-period payout of your own invested money — the balance earns your assumed return while payments draw it to zero. Insurance-company annuities differ in two ways: lifetime versions keep paying however long you live (pooling longevity risk), and their pricing embeds fees you can't see directly. A practical trick: get an insurer quote, then find the rate here that produces the same payment for your life expectancy — the gap between that implied rate and market rates is what the guarantee costs. For the flexible alternative, see the retirement withdrawal calculator and the 4% rule; for valuing a payout offer today, the present value calculator.
Same $500,000 at 5%, but this time picking the payment instead of the period: withdrawing $3,000/mo.
months = −ln(1 − P×r ÷ pay) ÷ ln(1 + r) = −ln(1 − 2,083.33 ÷ 3,000) ÷ ln(1.004167) ≈ 286 months (23 years, 10 months).
Total withdrawn: about $858,000, of which about $358,000 is interest earned along the way — a lower monthly payment than the first example's $2,923, but the money lasts longer as a result.
Monthly payout by assumed rate, $500,000 over 25 years
| Assumed annual return | Monthly payout |
|---|---|
| 3% | $2,372 |
| 4% | $2,641 |
| 5% | $2,923 |
| 6% | $3,222 |
| 7% | $3,533 |
Common annuity mistakes
- Confusing "annual return" with a safe payout rate. As the table above shows, a 3-point swing in the assumed return changes monthly income by nearly 50% for the same lump sum and period — the payout rate is not the same thing as an investment return, since it also draws down principal on purpose.
- Forgetting a fixed-period annuity exhausts the principal. Unlike some withdrawal strategies, this math schedules the entire lump sum to reach zero by the end of the term — there's nothing left for heirs, unlike a self-managed portfolio drawing only a sustainable amount.
- Comparing an insurer's lifetime quote directly to this fixed-period math without adjusting for longevity. A lifetime annuity that pays less per month than this calculator's fixed-period figure isn't necessarily a worse deal — it's also insuring against the risk of living longer than any fixed period assumes.
Frequently asked questions
How much monthly income does an annuity pay?
$500,000 at 5% over 25 years ≈ $2,923/mo. Insurer lifetime products price by age and longevity instead.
Annuity vs. withdrawing from savings?
Annuities guarantee income but give up principal and flexibility; self-managed withdrawals keep both but risk outliving the money. Mixing is common.
What rate should I use?
4–5% is a conservative payout-phase assumption; use the implied-rate trick above to evaluate insurer quotes.
How long does $500,000 last withdrawing $3,000/mo at 5%?
About 23 years and 10 months — total withdrawals of about $858,000, of which roughly $358,000 is interest earned along the way.
How much does the assumed rate change the monthly payout?
A lot — $500,000 over 25 years pays about $2,372/mo at 3% but about $3,533/mo at 7%, nearly a 50% swing from a 4-point rate change.
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Note: Models a fixed-period, fixed-rate payout; insurer annuity quotes include mortality pricing and fees not modeled here. Not financial advice. Last reviewed: September 2026.