Annuity Payout Calculator

This calculator can estimate the annuity payout amount for a fixed payout length or estimate the length that an annuity can last if supplied a fixed payout amount. Please use our Annuity Calculator to estimate the end balance of an annuity for the accumulation phase.

Annuity Payout Calculator

Modify the values and click the Calculate button to use

Note: Different calculators may produce slightly different results due to rounding methods or interest rate conversions.

Result

You can withdraw: $0.00
Total of payments: $0.00
Starting principal: $0.00
Total interest/return: $0.00
Number of payments: 0

Annuity Balances

Period number represents payment periods

Payout Schedule

Period	Payment	Principal	Interest	Balance

What is an Annuity Payout?

An annuity payout refers to the distribution phase of an annuity contract, where the accumulated funds are converted into a series of regular payments. During this phase, the annuity owner receives periodic payments that can be structured to last for a specific period or for the remainder of their lifetime.

Annuity payouts can be calculated in two primary ways: determining how much you can withdraw over a fixed period, or calculating how long your annuity will last if you withdraw a fixed amount regularly.

Types of Annuity Payouts

Fixed Length Payout

In this approach, you specify how long you want to receive payments, and the calculator determines the amount you can withdraw each period. This is useful for planning retirement income for a specific timeframe.

Fixed Amount Payout

With this method, you specify how much you want to withdraw regularly, and the calculator estimates how long your annuity will last. This helps you understand if your desired withdrawal rate is sustainable.

Annuity Payout Calculation Formulas

The mathematical formulas used to calculate annuity payouts depend on whether you want to determine the payment amount or the duration of payments.

Fixed Length Payout Formula

To calculate the periodic payment amount (PMT) for a fixed number of periods:

$$PMT = \frac{P \times r \times (1+r)^n}{(1+r)^n - 1}$$

Where P is the principal amount, r is the periodic interest rate, and n is the total number of payment periods. This formula ensures that the principal and earned interest are fully depleted at the end of the specified term.

Fixed Amount Payout Formula

To calculate how many periods (n) an annuity will last with fixed payment amounts:

$$n = \frac{\log(\frac{PMT}{PMT - P \times r})}{\log(1+r)}$$

Where PMT is the periodic payment amount, P is the principal amount, and r is the periodic interest rate. This formula tells you how many payment periods your annuity will last before being depleted.

Impact of Payout Frequency

The frequency of your annuity payouts affects both the amount you can withdraw and how long your principal will last:

Monthly

More frequent smaller payments that provide regular income. Interest compounds more often, potentially resulting in a longer-lasting annuity.

Quarterly

Moderate-sized payments every three months. Balances regular income needs with less frequent account activity.

Annual

Larger, less frequent payments. May be suitable for supplementing other regular income sources or for planned annual expenses.

How to Use This Calculator

Enter your starting principal amount (the money you've accumulated in your annuity).
Specify the annual interest or return rate you expect to earn.
Select whether you want to calculate based on a fixed length or fixed payment amount.
For fixed length: Enter the number of years you want payments to last. For fixed payment: Enter how much you want to withdraw each period.
Choose your preferred payout frequency (monthly, quarterly, or annually).

Important Considerations for Annuity Payouts

Inflation Impact

Remember that inflation will reduce the purchasing power of fixed payouts over time. Consider planning for higher withdrawal amounts in later years or choosing an annuity with inflation protection.

Tax Implications

Annuity payouts may be subject to income tax. Depending on the type of annuity and how it was funded, a portion of each payment might be considered a return of principal (tax-free) while the remainder is taxable as ordinary income.

Life Expectancy

If planning for retirement, consider your life expectancy when deciding between fixed term and lifetime payouts. Many people underestimate how long they'll live, potentially risking outliving their savings.

Frequently Asked Questions

What happens if I need to withdraw more money than my scheduled payout?

Many annuities allow for withdrawals above the scheduled amount, but these often come with surrender charges or tax penalties, especially in the early years of the contract. Check your specific annuity terms for details on allowable withdrawals.

Can I change the payout amount or frequency after starting the distribution phase?

This depends on your specific annuity contract. Some annuities offer flexibility to adjust payouts, while others have fixed terms once the distribution phase begins. Variable and indexed annuities typically offer more flexibility than fixed annuities.

How does the interest rate affect my annuity payout?

Higher interest rates result in larger payouts for the same principal amount and time period. Even a small increase in the interest rate can significantly increase the total amount received over the life of the annuity due to compound interest.

Should I choose a fixed length or fixed payment for my annuity?

This depends on your financial needs and goals. Choose fixed length if you need income for a specific time period (e.g., until another income source begins). Choose fixed payment if you have a specific income requirement and want to know how long your money will last.

Are annuity payouts guaranteed?

The guarantee depends on the type of annuity. Fixed annuities provide guaranteed payouts, while variable annuities' payouts fluctuate with investment performance. All guarantees are subject to the financial strength and claims-paying ability of the issuing insurance company.