Annuity Payout Calculator

See how much monthly income a savings balance can pay out over time.

How the Math Works

The Annuity Payout Calculator uses a standard present value of annuity formula to determine the fixed monthly payment you can withdraw from a lump sum investment. The formula monthly = P × r ÷ (1 - (1+r)^-n) breaks down as follows: P represents your principal nest egg, r is the monthly interest rate (annual rate divided by 12), and n is the total number of months over your desired payout period. The denominator (1 - (1+r)^-n) calculates the present value factor, which accounts for the time value of money and ensures the total withdrawals plus remaining interest will exactly deplete the principal by the end of the term. This formula assumes a fixed interest rate and equal payments at regular intervals throughout the payout period.

Practical Applications

To use this calculator practically, start by entering your total savings amount as the principal (P), then determine the annual interest rate your investment earns and convert it to a monthly rate by dividing by 12 (r). Next, decide how long you want your money to last and convert years to months (n). For example, if you have $500,000, expect a 4% annual return, and want payments for 20 years, you'd input P=500000, r=0.04/12, and n=240. The calculator will output your sustainable monthly withdrawal amount. You can test different scenarios by adjusting these variables to see how interest rates, time periods, and principal amounts affect your monthly income.

Day-to-Day Use

This calculator helps you transform your life savings into predictable, regular income that can cover your living expenses in retirement. Knowing your monthly payout removes uncertainty about whether your nest egg will last throughout your retirement years, allowing you to budget confidently for housing, healthcare, travel, and daily needs. It also helps you make informed decisions about when to retire, how much additional savings you need to maintain your desired lifestyle, and whether to work part-time or reduce expenses. By providing concrete numbers, this tool gives you peace of mind and financial security, ensuring your hard-earned savings work as a reliable income stream rather than a source of retirement anxiety.

Worked example

$500k at 4% over 25 yr → ~$2,639/mo.

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