What This Calculator Does
You have saved $300,000 for retirement. Now the question shifts from accumulation to distribution: how much can you withdraw each month without running out of money? An annuity payout calculator answers exactly that. It calculates the fixed monthly payment you can receive from a given principal over a specific time period.
This calculator is the distribution phase counterpart to the annuity savings calculator. It is useful for modeling income from retirement savings, insurance annuities, structured settlements, or any scenario involving periodic withdrawals from a lump sum.
In 2026, annuity payout rates are at their most favorable levels in over a decade. A 65-year-old man purchasing a Single Premium Immediate Annuity (SPIA) with $100,000 can expect approximately $664 per month for life, according to July 2026 data from A-rated carriers. That is up 7.4% since March 2026, driven by elevated long-term bond yields that insurers pass through to payout rates. The UCLA Anderson Review reports that a typical 65-year-old can expect to receive 80 to 85 cents back in payments for every premium dollar paid, and actual annuity buyers often receive more than 90 cents.
Inputs Required
- Annuity Principal: The starting lump sum balance
- Annual Interest Rate: The rate earned on the remaining balance during the payout phase
- Payout Duration: How many years the payments will last
Outputs Provided
- Monthly Payout: The fixed amount you receive each month
- Total Payout: The total amount received over the full term
- Total Interest Received: Interest earned on the balance during the payout phase
- Balance Depletion Chart: Year by year view of how the balance decreases and total withdrawals accumulate
How the Calculation Works
The annuity payout uses the same present value formula as loan amortization. The principal earns interest each month, and the withdrawal covers that interest plus a portion of the principal. The formula ensures the balance reaches exactly zero at the end of the term.
PMT = PV x [r x (1 + r)^n] / [(1 + r)^n - 1]
- PMT is the monthly payout
- PV is the present value (starting principal)
- r is the monthly rate (annual rate divided by 12)
- n is the total number of monthly payments
Early in the payout phase, most of each payment consists of interest. Over time, as the balance decreases, the interest portion shrinks and the principal portion grows. This mirrors loan amortization in reverse.
How to Use the Calculator
- Enter the total amount you have saved or will receive as a lump sum
- Set the expected annual interest rate the balance will earn during payouts
- Choose how many years you want the income to last
- Review your monthly payout and total lifetime income
- Use the chart to see how quickly your balance decreases over time
For the interest rate, use a conservative estimate. If you are modeling a fixed annuity product, current MYGA rates of 5.25% to 5.65% are reasonable. If you are modeling self-managed withdrawals from a diversified portfolio, 4% to 5% is safer. For the accumulation phase that precedes this, use our Annuity Calculator to see how regular contributions build your lump sum.
Example Calculations
Example 1: The Standard Retirement Drawdown
Starting with $300,000, a 5% annual return, and a 20-year payout term:
- Monthly payout: approximately $1,980
- Total received over 20 years: approximately $475,000
- Interest earned during payout phase: approximately $175,000
The $175,000 in interest earned while drawing down the balance means you receive significantly more than the original $300,000 in total payments. Without any interest, the same principal would last only 12.6 years at the same monthly withdrawal amount.
Example 2: Comparing Payout Durations
Carl, a 62-year-old retiree in Phoenix, has $500,000 saved. He runs three scenarios at 4.5% return:
- 20-year payout: approximately $3,163 per month
- 25-year payout: approximately $2,780 per month
- 30-year payout: approximately $2,533 per month
The difference between 20 and 30 years is about $630 per month. Carl must weigh his life expectancy, health, and other income sources (like Social Security) to choose the right duration. Adding 5 to 10 years to his life expectancy as a buffer is a common strategy to avoid outliving the money. For modeling Social Security income, try our Social Security Calculator.
Real World Scenarios
Retiree Planning Income
Carl has $500,000 in retirement savings and wants income for 25 years. At a 4.5% return, this calculator tells him exactly how much he can withdraw monthly without depleting the account before age 90. He can adjust the return rate or duration to stress-test different scenarios. If he earns 5.5% instead of 4.5%, his monthly income rises by about $200 per month, or $60,000 over the full term.
Structured Settlement Evaluation
Jennifer received a $200,000 legal settlement and is considering converting it to monthly income over 15 years. At a 5% return, the calculator shows she would receive approximately $1,582 per month. She can compare this to investing the lump sum independently and withdrawing on her own schedule, weighing the tradeoff between guaranteed income and flexibility.
Comparing Insurance Annuity Quotes
Before purchasing an insurance annuity, use this calculator to verify whether the quoted monthly payment is fair. As of July 2026, a 65-year-old man should receive roughly $664 per month per $100,000 of premium for a life-only SPIA from an A-rated carrier. If the insurer's offer is significantly below the calculated amount, the product may include high fees, a low implied interest rate, or costly riders. The best-to-worst spread across A-rated carriers is currently 5 to 6%, which on a $300,000 premium means roughly $1,300 per year in income difference for life.
Why This Calculation Matters
One of the biggest risks in retirement is outliving your savings. According to NBER research, two-thirds of Americans are more afraid of running out of money than of death. Knowing exactly how long your money will last at a given withdrawal rate empowers you to make deliberate decisions about spending, investment strategy, and when to begin drawing down different accounts.
The interest rate earned during the payout phase has a massive impact on how long your money lasts. Even a 1% difference in return rate can add years to the life of your savings. A $300,000 balance at 5% over 20 years pays about $1,980 per month. At 3%, the same balance pays only about $1,664 per month. That is over $300 less per month, or about $75,000 less over the full term.
Common Mistakes to Avoid
- Not accounting for inflation: A fixed payout will buy less over time. $2,000 per month today will have the purchasing power of about $1,480 in 10 years at 3% inflation. Consider whether your monthly income keeps pace with rising expenses.
- Assuming too high a return: Conservative payout phase returns (3% to 5%) are safer than assuming continued high-growth equity returns. A market downturn early in retirement can permanently reduce your sustainable withdrawal rate.
- Ignoring taxes: Withdrawals from traditional retirement accounts and annuities are generally taxable. Your net monthly income will be less than the gross payout shown by this calculator.
- Not leaving a buffer: Planning to deplete the account exactly at life expectancy leaves no margin for a longer life. Consider adding 5 to 10 years to your payout duration, or keep a separate emergency fund.
- Forgetting about carrier risk: If you purchase an annuity from an insurance company, the guarantees depend on the insurer's financial strength. Look for carriers rated A or better by AM Best.
Limitations of This Calculator
This tool calculates a fixed monthly payout that depletes the principal to zero over a set term. It does not model lifetime annuities (which pay until death), inflation-adjusted withdrawals, variable returns from market investments, or tax-advantaged accounts like Roth IRAs. The calculator assumes a constant interest rate throughout the payout period, which is realistic for fixed annuities but not for self-managed investment portfolios. For a complete retirement income plan, consider working with a fee-only financial advisor. This calculator does not replace professional financial or tax advice.
Authoritative Research and Resources
- UCLA Anderson Review: The Annuity Puzzle Revisited - Analysis of NBER research on why few Americans buy annuities despite fear of outliving savings, with data on expected payout ratios for typical and actual annuity buyers.
- NBER Working Paper w35145: The Annuity Puzzle Revisited - The underlying research paper on barriers to lifetime income adoption and policy paths forward, by Hershfield, Shu, Brown, Hurwitz, Milevsky, Mitchell, and Toland.
- Best SPIA Rates - July 2026 - Current single premium immediate annuity payout rates by age and carrier, surveyed monthly across 8 A-rated US insurers.
For the accumulation phase, see our Annuity Calculator. For broader retirement planning, try our Retirement Calculator or 401(k) Calculator.