Annuity Calculator
Estimate annuity payouts from a lump sum.
Details
Monthly payout
$2,922.95
For 25 years, until the balance is depleted
This works out annuity payments: what a lump sum pays out over a period, or what a stream of payments is worth today.
It handles both ordinary annuities, which pay at the end of each period, and annuities due, which pay at the start.
What an annuity is
The word annuity means two different things, and readers usually arrive meaning one of them.
In finance it is a structure: any series of equal payments at regular intervals. A mortgage is an annuity. So is a pension, a lease, or a bond's coupon stream. The maths on this page is that structure.
In insurance it is a product: you hand an insurer a lump sum and they pay you an income, sometimes for life. That is built on the same maths, with the insurer's fees and mortality assumptions layered on top.
The extra $58,389 is growth on the balance that has not yet been paid out. This is the pure calculation, before any product fees.
What to enter
- Present value or payment
- Enter the lump sum to find the payment, or the payment to find what the stream is worth today.
- Interest rate
- The return assumed on the balance while it pays out. A higher rate supports a larger payment.
- Number of periods
- How long payments continue. A longer period means smaller payments from the same lump sum.
- Timing
- An ordinary annuity pays at the end of each period; an annuity due pays at the start and is worth slightly more.
The kinds of annuity you will meet
- Ordinary annuity
- Payments at the end of each period. The default, and how mortgages and most loans work.
- Annuity due
- Payments at the start. Rent works this way. Worth slightly more, since each payment is received one period earlier.
- Fixed annuity (product)
- A guaranteed rate from an insurer. Predictable, and the return usually reflects that.
- Variable annuity (product)
- Returns tied to investments. Higher potential, and typically the highest fees of the group.
- Immediate vs deferred
- Immediate starts paying now; deferred grows first and pays later. Deferred products often carry surrender charges.
What this assumes
A constant rate throughout, which is realistic for a fixed annuity and not for a variable one.
This is the underlying maths. An insurance product also carries fees, commissions and surrender charges that reduce what you actually receive.
How to calculate annuity payments
The same formula runs both directions: lump sum to payment, or payment to lump sum.
- PV
- Present value, the lump sum
- PMT
- Payment per period
- r
- Rate per period, so an annual rate divided by 12 for monthly
- n
- Number of payments
Match the rate to the payment frequency. Monthly payments need a monthly rate and a count in months. This is where most errors occur.
Work out the annuity factor. The bracketed term. It is the present value of $1 paid each period for n periods.
Multiply or divide. Payment times the factor gives the lump sum. Lump sum divided by the factor gives the payment.
Adjust for an annuity due. Multiply by (1 + r). Payments arriving a period earlier are worth slightly more.
See a worked example: turning $100,000 into an income
- Lump sum
- $100,000
- Rate
- 5% a year
- Period
- 20 years, paid monthly
Monthly rate: 5% ÷ 12 = 0.4167%. Periods: 240.
Payment: $659.96 a month.
Total received: $659.96 × 240 = $158,389.
$58,389 of that is growth on the money still waiting to be paid out. An insurance product would deduct fees from this figure.
$659.96 a month for 20 years
Frequently asked questions
Ordinary pays at the end of each period; due pays at the start. Loans are ordinary annuities, rent is an annuity due.
An annuity due is worth slightly more, because every payment arrives one period earlier and so is discounted less. Multiply the ordinary value by (1 + r) to convert.
They are insurance rather than investment, and they are best judged on what insurance does: transferring the risk of outliving your money to someone else.
The cost of that protection is real. Fees, commissions and surrender charges can be substantial, particularly on variable and indexed products. Someone with sufficient assets and other guaranteed income often does not need one; someone worried about running out at 90 may value it highly.
A penalty for withdrawing money from a deferred annuity within a set period, often five to ten years, and it can start in the high single digits before declining each year.
It is the single most important thing to establish before buying. Money in a deferred annuity is not readily accessible, which is exactly the opposite of an emergency fund.
Growth is tax deferred while it stays inside the annuity, and taxed as ordinary income when withdrawn, not at capital gains rates.
That distinction matters. The same growth in a taxable brokerage account might be taxed at 15%; from an annuity it is taxed at your marginal rate.
Yes, mathematically. It is a series of equal payments at regular intervals, which is exactly what an annuity is.
The same formula that finds a mortgage payment from a loan amount finds an annuity payment from a lump sum. Only the direction of the money differs.
For a fixed annuity, use the rate being offered, since it is contractual. For a general calculation, something conservative like 4-5%.
For a variable annuity the answer is unknowable, and the fees are the more useful thing to focus on. They are certain in a way the returns are not.
Problems people actually run into
Comparing an annuity product on the payout alone
A larger monthly payment can simply mean a shorter guaranteed period or fewer protections, not a better deal.
Compare the same structure across insurers: same term, same guarantees, same inflation adjustment. Then look at the fees, which is where products with identical payouts genuinely differ.
Overlooking inflation on a fixed payment
$659.96 a month is fixed for twenty years. At 3% inflation, its buying power at the end is about $365 in today's money.
Some annuities offer an inflation-adjusted payout, which starts lower and rises. Over a long retirement that is often the more useful structure, and the lower starting figure is what puts people off it.
Results are estimates for general information only and are not professional financial, medical, or legal advice. Read our full disclaimer.
Last updated: September 4, 2026