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Annuity Payout Calculator

Enter your annuity balance, interest rate, and payout period to see your periodic payment and a full payout schedule.

Inputs

$

The current lump-sum value or account balance of the annuity.

%

The annual interest or return rate credited to the annuity during payout.

Number of years over which payments will be made.

How often payments are received.

Ordinary annuities pay at the end of each period; annuity-due pays at the start, yielding slightly smaller payments.

Results update as you type, and the address bar keeps your numbers so the link you share reopens this exact calculation.

Payment per period

$3,300

Ordinary annuity: payment made at the end of each period.

Detailed results
Total paid outSum of all payments over the full payout period.$791,947
Interest earned during payoutInterest earned by the annuity balance during the payout period.$291,947
Total payout periodsTotal number of monthly payments.240

What this result means

Payment per period: $3,300.

A $500,000 annuity at 5% annually will pay $3,300 monthly for 20 years as an ordinary annuity (end of period). Over 240 payments you will receive $791,947 in total — $291,947 more than the original balance thanks to interest earned during the payout period.

Payout Schedule

Period-by-period breakdown showing each payment, the interest portion, principal portion, and remaining balance.

Payout Schedule. 240 rows, first 12 shown.
PeriodPaymentInterest portionPrincipal portionRemaining balance
1$3,300$2,083$1,216$498,784
2$3,300$2,078$1,222$497,562
3$3,300$2,073$1,227$496,335
4$3,300$2,068$1,232$495,104
5$3,300$2,063$1,237$493,867
6$3,300$2,058$1,242$492,625
7$3,300$2,053$1,247$491,378
8$3,300$2,047$1,252$490,125
9$3,300$2,042$1,258$488,868
10$3,300$2,037$1,263$487,605
11$3,300$2,032$1,268$486,337
12$3,300$2,026$1,273$485,063

How this is calculated

Ordinary annuity:  PMT = PV × r / (1 − (1+r)^(−n))
Annuity-due:       PMT = PV × r / ((1 − (1+r)^(−n)) × (1+r))
where  PV = present value / lump sum
       r  = annual_rate / 100 / payout_frequency  (rate per period)
       n  = years × payout_frequency              (total periods)
When r = 0: PMT = PV / n

What is an annuity payout?

An annuity payout converts a lump sum — such as retirement savings, an insurance settlement, or a pension buyout — into a predictable stream of periodic payments. The annuity issuer (an insurance company or financial institution) credits interest on the remaining balance while simultaneously returning principal to you in each payment. The result is a fixed amount that continues for a specified number of years, after which the balance is fully depleted.

Ordinary annuity vs. annuity-due

The two standard payment-timing conventions produce slightly different payment sizes for the same lump sum:

  • Ordinary annuity (most common): each payment is made at the end of the period. Interest accrues on the full balance before the first payment is made, which means the issuer earns one extra period of interest and can therefore afford to pay you slightly more each period.
  • Annuity-due: each payment is made at the start of the period. Because the first payment leaves immediately — before any interest accrues — the payment size is slightly lower than an ordinary annuity for the same inputs.

The difference is a factor of (1 + r), where r is the period interest rate. For a 5% annual rate paid monthly, that factor is roughly 1.004167, so annuity-due payments are about 0.4% smaller than ordinary payments.

How interest rate affects payment size

A higher interest rate means the remaining balance earns more between payments, allowing each payment to be larger. Conversely, a low-rate environment forces the annuity to rely more heavily on returning principal, resulting in a smaller payment for the same lump sum and term. This sensitivity is why comparing annuity quotes across different rate environments can produce dramatically different income levels.

Longevity risk

A fixed-term annuity runs out of money after the specified period. If you live longer than the payout period, you receive nothing further. This longevity risk is the central trade-off of term-certain annuities versus life annuities, which pay until death regardless of how long that takes. Many retirees use term-certain annuities to bridge a gap (for example, from retirement to Social Security eligibility) rather than as a lifetime income strategy.

Fixed vs. variable annuities

This calculator models a fixed annuity, where the interest rate is locked in and payments never change. Variable annuities invest in sub-accounts (similar to mutual funds), so the credited rate fluctuates with market performance. Variable payouts can grow in good markets but shrink in bad ones. Indexed annuities offer partial market participation with downside protection. Fixed annuities offer predictability; variable annuities offer growth potential with uncertainty.

Inflation risk with fixed payouts

Because a fixed annuity pays the same nominal dollar amount every period, its real (inflation-adjusted) purchasing power erodes over time. At 3% annual inflation, a $3,000 monthly payment today buys only about $2,240 worth of goods after 10 years and $1,670 after 20 years. Some annuities offer cost-of-living adjustment (COLA) riders that increase payments annually at a fixed rate, though the initial payment will be lower to compensate. Evaluating whether a COLA rider is worth the lower starting income requires projecting both scenarios against your expected inflation rate.

Assumptions

  • The interest rate is fixed for the entire payout period; variable or indexed annuities are not modelled.
  • Payments are level (constant nominal amount) throughout the payout period; no cost-of-living adjustments are applied.
  • The annuity balance earns interest continuously between payments at the stated annual rate, compounded at the payment frequency.
  • No taxes, fees, surrender charges, or management expenses are deducted from the annuity balance or payments.
  • The payout period is fixed in advance; payments stop when the balance reaches zero or after n periods, whichever comes first.
  • For ordinary annuities, the first payment occurs at the end of the first period; for annuity-due, the first payment occurs immediately at the start.
  • The lump sum is fully invested at the stated rate from day one with no ramp-up period.

Frequently asked questions

›What is the difference between an ordinary annuity and an annuity-due?

An ordinary annuity pays at the end of each period, while an annuity-due pays at the start. Because annuity-due payments leave before the first period's interest accrues, each payment is slightly smaller — by a factor of 1/(1+r) — compared with an ordinary annuity with identical inputs. In practice, most commercial annuity contracts use the ordinary convention, so that is the most common default.

›What happens if I outlive the payout period?

A fixed-term annuity stops paying once the balance reaches zero at the end of the specified period. If you outlive that term, there are no further payments. To avoid this longevity risk, consider a *life annuity* (also called a lifetime income annuity), which guarantees payments until death regardless of how long you live, in exchange for a lower periodic payment than a term-certain annuity of the same length.

›How does inflation affect my fixed annuity payments?

Fixed annuity payments stay constant in nominal (dollar) terms, but inflation erodes their purchasing power each year. At 3% annual inflation, $3,000 per month today is equivalent to only about $2,240 in real terms after 10 years. Some annuities include a cost-of-living adjustment (COLA) rider that raises payments annually, though the initial payment will be lower. It is worth modelling both scenarios to decide if the inflation protection is worth the reduced starting income.

›Can I change my payment frequency after the annuity starts?

Most fixed annuity contracts lock in the payment frequency at issue. Changing frequency typically requires surrendering the contract and purchasing a new one, which may trigger surrender charges, tax consequences, or a loss of rate guarantees. Before purchasing, choose the frequency that best matches your cash-flow needs — monthly for regular living expenses, quarterly or annually if you prefer larger, less frequent deposits.

›What is the interest portion versus the principal portion of each payment?

Each payment has two components: (1) the *interest portion* is the interest earned on the remaining balance during that period (remaining_balance × r), and (2) the *principal portion* is the remaining payment amount, which reduces the balance (payment − interest portion). Early payments have a higher interest portion because the balance is large; later payments are mostly principal as the balance winds down. The payout schedule in this calculator shows the exact split for every period.

›How does a fixed-term annuity compare to a life annuity?

A fixed-term annuity pays for a defined number of years regardless of whether you are alive or not — if you die early, payments often continue to a beneficiary. A life annuity pays until you die, eliminating longevity risk but providing no residual value if you die early. Life annuity payments are typically lower per period than a same-sized term annuity of similar expected duration, because the insurer must price in the possibility that you live much longer than average. Neither is universally superior; the right choice depends on health, other income sources, and how much you value legacy vs. income certainty.

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