Annuity Calculator
Find the monthly income a lump sum can pay over a set time, or how much regular payments into an annuity could grow to.
Results
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Quick Answer
An annuity turns a lump sum into regular payments, or regular payments into a lump sum. At a 5% yearly rate, $300,000 could pay about $1,979.87 a month for 20 years. Paying $500 a month into an annuity at 6% for 25 years could grow to about $346,497.
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Table of Contents
- Annuity Calculator
- Quick Answer
- Related Calculators
- How This Annuity Calculator Works
- How to Use the Annuity Calculator
- Core Formulas
- Key Terms
- Worked Example
- Real-Life Examples
- Fixed Annuity vs Variable Annuity
- Monthly Payout per $100,000
- What Real Annuities Add
- Common Mistakes to Avoid
- Frequently Asked Questions
- References & Sources
How This Annuity Calculator Works
An annuity is a series of equal payments over time. In payout mode, the calculator finds the monthly income a lump sum can pay until it runs out. In growth mode, it finds what regular monthly payments, plus any starting amount, could grow to.
Quick explanation: payout = amount × r ÷ (1 − (1 + r) ^ −n), with r as the monthly rate and n as the number of months.
- Payout mode: for retirement income from savings or an annuity purchase.
- Growth mode: for saving into an annuity or similar account.
- Fixed rate: real products may have variable returns and fees.
How to Use the Annuity Calculator
- Choose payout mode for income from a lump sum, or growth mode for saving monthly.
- Enter your starting amount.
- In growth mode, enter how much you will pay in each month.
- Enter the yearly interest rate and the number of years.
- Press Calculate to see the monthly payout or the future value.
Core Formulas
- Monthly rate: r = yearly rate ÷ 12
- Payout (present value annuity): PMT = PV × r ÷ (1 − (1 + r) ^ −n)
- Future value: FV = P × (1 + r) ^ n + PMT × ((1 + r) ^ n − 1) ÷ r
- With a 0% rate: payout = PV ÷ n, and FV = P + PMT × n
Key Terms
- Annuity: a series of equal payments made at regular intervals.
- Present value: what a stream of future payments is worth today.
- Future value: what regular payments plus interest will be worth later.
- Annuity due: payments made at the start of each period instead of the end.
- Surrender charge: a fee for taking money out of an annuity contract early.
Worked Example
You retire with $500,000 and want it to last 25 years at a 4.5% yearly rate.
- Monthly rate = 4.5% ÷ 12 = 0.375%
- Number of payments = 300
- Monthly payout = $2,779.16
- Total paid out = $833,749
Real-Life Examples
- Retirement income: $300,000 at 5% pays about $1,979.87 a month for 20 years, or about $1,610.46 a month for 30 years.
- A lottery-style choice: $1,000,000 paid out over 20 years at 4% is about $6,059.80 a month.
- Saving for later: $500 a month at 6% for 25 years could grow to about $346,497, of which $150,000 is money paid in.
- Checking a quote: if an insurer offers $1,500 a month for 20 years on $250,000, try a few rates. At 4% this calculator gives $1,514.95, so the offer works out to a little under 4% before any lifetime features.
Fixed Annuity vs Variable Annuity
- Fixed annuity: pays a set rate, so income is predictable. This calculator models this type.
- Variable annuity: invests in funds, so value and income can go up or down.
- Indexed annuity: returns follow a market index, with limits on gains and losses.
- Immediate vs deferred: immediate annuities start paying soon after purchase, while deferred ones grow first.
Monthly Payout per $100,000
Payments last for the full term, then the money runs out.
| Rate | 10 years | 20 years | 30 years |
|---|---|---|---|
| 2% | $920.13 | $505.88 | $369.62 |
| 3% | $965.61 | $554.60 | $421.60 |
| 4% | $1,012.45 | $605.98 | $477.42 |
| 5% | $1,060.66 | $659.96 | $536.82 |
| 6% | $1,110.21 | $716.43 | $599.55 |
| 7% | $1,161.08 | $775.30 | $665.30 |
What Real Annuities Add
- Fees: administration, investment and rider fees lower your income.
- Lifetime income: some annuities pay for life instead of a set number of years.
- Surrender charges: taking money out early can cost a penalty.
- Taxes: part of each payment may be taxable, depending on the account.
Common Mistakes to Avoid
- Ignoring fees. A 1% to 2% yearly fee can cut income noticeably.
- Confusing a set term with lifetime income. This calculator pays for a set number of years.
- Forgetting inflation. A fixed payment buys less each year.
- Using a high rate. Test a cautious rate to see a safer income.
- Locking in money you may need. Surrender charges can apply for years.
Frequently Asked Questions
Multiply the amount by the monthly rate, then divide by 1 minus (1 + monthly rate) raised to minus the number of months.
At 5% for 20 years, about $659.96 a month. Real offers depend on your age, the insurer and fees.
A pension is usually paid by an employer. An annuity is a contract you buy, often from an insurer.
Often in part. The share that is your own after-tax money is usually not taxed, but earnings are. Check with a tax professional.
It depends on the contract. Some stop, while others pay a beneficiary for a guaranteed period.
It can provide steady income, but fees and limits vary. Compare offers and get independent advice.
An annuity where each payment is made at the start of the period. It earns slightly more interest than an ordinary annuity.
References & Sources
| Source | Used For | Link |
|---|---|---|
| U.S. SEC, Investor.gov: Annuities | How annuities work and their costs. | https://www.investor.gov/introduction-investing/investing-basics/investment-products/annuities |
| Wikipedia, Annuity | Annuity formulas. | https://en.wikipedia.org/wiki/Annuity |