Finance · Retirement
Annuity Payout
Calculator
Calculate your periodic payment, how long your funds will last, or the starting balance needed. Includes full payout schedule, balance depletion chart, and inflation adjustment.
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Annuity Payout Calculator
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Real Pmt (adj)
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📊 Payout Summary
📋 Formula & Steps
📈 Balance Depletion Over Time
🗓️ Full Payout Schedule
How Annuity Payouts Work
An annuity payout converts a lump sum into a stream of regular payments. Each period, interest is earned on the remaining balance, then a payment is made. Early payments are mostly interest; later payments draw down more principal — similar to a mortgage in reverse.
Annuity Payment Formula
Ordinary annuity payment:
PMT = PV × [r(1+r)^n] / [(1+r)^n − 1]
Annuity due payment (paid at START of period):
PMT_due = PMT_ordinary / (1 + r)
Where:
PV = Present value (starting balance)
r = Periodic interest rate = annual rate / frequency
n = Total number of payments = years × frequency
Duration (given PV and PMT):
n = −ln(1 − PV×r/PMT) / ln(1+r)
Starting balance needed:
PV = PMT × [(1+r)^n − 1] / [r(1+r)^n]
How much can I withdraw from $500,000?
At 5% annual return with monthly payments over 20 years, $500,000 supports a payment of about $3,300/month ($39,600/year). At 4% over 25 years, it supports about $2,636/month. The 4% rule of thumb — widely used in retirement planning — suggests withdrawing 4% per year from a portfolio, which at 0% growth gives 25 years of payments. With investment returns, the money lasts longer.
What happens when interest rate equals withdrawal rate?
If your annual withdrawal equals the annual interest earned, your balance never decreases — you have a perpetuity. For example: $500,000 at 5% earns $25,000/year. If you withdraw exactly $25,000/year, the balance stays at $500,000 forever. This is the theoretical basis of an endowment fund. To deplete the balance over a finite period, your withdrawal must exceed the interest earned per period.
What is the difference between an annuity and a pension?
An annuity is a financial product — you give an insurance company a lump sum, they pay you regular income. A pension is an employer-provided benefit where the employer funds your retirement income. Both provide regular payments, but annuities are purchased and pensions are earned. An annuity payout calculator applies to both: any scenario where a known starting balance generates periodic income over a defined period.
How does inflation affect annuity payouts?
A fixed payment of $3,000/month today will have less purchasing power each year due to inflation. At 3% inflation, $3,000 in 10 years is worth only about $2,232 in today's dollars. To find the inflation-adjusted (real) value, divide the nominal payment by (1+inflation)^year. Some annuities offer cost-of-living adjustments (COLA) — they start with a lower payment but increase it annually by an inflation rate. This calculator shows both nominal and real values.
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