The Annuity
Results
Annuity Payout Calculator Guide
Work out what income a lump sum produces over a fixed period — or what lump sum a target income requires.
Payment = PV × r ÷ (1 − (1+r)⁻ⁿ) where r is the rate per period and n the number of periods.
$500,000 at 5% over 20 years = $3,299.78 a month, totalling about $791,947.
Perpetuity — never touching capital: PV × rate = $25,000 a year, or $2,083 a month.
You're Spending Capital and Growth Together
$500,000 paying $3,300 a month for twenty years hands back $792,000 — nearly $292,000 more than you put in, because the balance keeps earning while it's drawn down.
But at the end of year twenty, it's gone. Entirely. The payments stop and the capital is spent. That's the deal a fixed-period annuity makes, and it's a perfectly reasonable one — as long as you're clear it's what you agreed to.
The Number That Should Worry You
Look at the never-touch-capital figure. The same $500,000 at 5% supports $2,083 a month forever, versus $3,300 for twenty years.
You're being paid an extra $1,200 a month to hand over your capital permanently. Whether that's a good trade depends entirely on how long you live — which is the one variable nobody knows and the reason the annuity industry exists at all.
Inflation Is the Quiet Problem
A level annuity pays the same number for twenty years. At 3% inflation, that final $3,300 payment buys what about $1,827 buys today — a 45% cut in purchasing power, arriving slowly enough that it never feels like an event.
Inflation-linked annuities exist and start much lower, which is why people rarely choose them. Enter an inflation rate above to see the erosion made explicit.
What This Doesn't Model
Real annuity products are priced on mortality, not just arithmetic. A life annuity pays until you die — which could be far longer or shorter than any fixed period, and the insurer prices that risk using tables and margins that aren't public.
Real products also carry commissions, surrender charges, and riders that change the maths considerably. This calculator gives you the honest arithmetic of a fixed-period payout: useful for understanding whether a quote is reasonable, useless as a substitute for the quote itself.
The Trade-Off Nobody Names
Annuities exchange flexibility for certainty. You give up access to capital — you can't take $30,000 out for a roof — in return for never having to think about running out.
That's genuinely valuable to some people and genuinely wrong for others, and the difference isn't about maths at all. It's about whether the thing you fear most is running out of money or losing control of it.
Related: retirement calculator, compound interest calculator, savings goal calculator.
These results are estimates for education and planning, not financial advice. Actual returns, rates, and terms vary — check with a qualified professional before making decisions.
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