Retirement
Annuity Payout Calculator
Turning savings into income is the hardest arithmetic in retirement. This answers the simplest version: if a balance has to last exactly this many years and earns a steady return while it drains, what can it pay each month?
Tested against worked examplesHow we verify
Conservative — this money is being spent, so it is usually invested cautiously.
Monthly payout: $3,030
Monthly payout
$3,030
Until the balance reaches zero after 20 years.
- Annual income
- $36,359
- Total paid out
- $727,176
- Of which interest
- $227,176
Earned by the balance while it drains.
Compare scenariosTry three values of one input
| Lump sum | |||
|---|---|---|---|
| Monthly payout | $2,727 | $3,030+$303 | $3,333+$606 |
| Annual income | $32,723 | $36,359+$3,636 | $39,995+$7,272 |
| Total paid out | $654,458 | $727,176+$72,718 | $799,894+$145,435 |
| Of which interest | $204,458 | $227,176+$22,718 | $249,894+$45,435 |
Every other input stays at the value you set above — currently $500,000 for lump sum. Differences are measured against the first column.
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How this calculator works
The monthly payout is the level payment that fully amortises the lump sum over the period at the given return — the same formula as a loan payment, with you as the lender. Interest earned is total payments minus the original principal.
Assumes a constant return, level payments, and no inflation adjustment, so later payments buy less than early ones. It also ignores taxes, which depend heavily on whether the money sits in a taxable, traditional, or Roth account.
What this assumes
- The payout rate you enter, held for life. Real quotes depend on your age, sex, the insurer and the rate environment on the day you buy.
- No inflation adjustment unless you enter a lower rate to approximate one. A level payment loses roughly half its purchasing power over 25 years at 3% inflation.
- The insurer's solvency is assumed. State guaranty associations cover annuities only up to limits that vary by state.
What changes this number
- Your age at purchase
- The dominant input. Buying later shortens the insurer's expected payout period, which raises the rate substantially.
- Whether it is inflation-adjusted
- A level annuity and an indexed one with the same starting payment are very different products over a long retirement.
- Survivor provisions
- A joint-life payout is lower because it must last two lifetimes. That reduction is the cost of protecting a spouse.
A worked example
Take the $500k over 20 years at 4% scenario. These figures are produced by the calculator above, not written alongside it, so they always match what the tool returns.
What you enter
- Lump sum
- $500,000
- Annual return while drawing down
- 4%
- Years the payout must last
- 20 years
What it returns
- Monthly payout
- $3,030
- Annual income
- $36,359
- Total paid out
- $727,176
- Of which interest
- $227,176
Try an example
Frequently asked questions
Is this the same as buying an annuity?
No — it is the self-managed version. A commercial annuity transfers longevity risk to an insurer, which pays for life however long that is, in exchange for fees and giving up access to the principal. This shows what the same lump sum yields if you draw it down yourself over a fixed period.
What happens if I live longer than the period?
The money is gone. That is the central risk of a fixed-period drawdown and the reason lifetime annuities exist. Many people cover essential spending with guaranteed income — Social Security, a pension, or a small annuity — and use a drawdown like this for the discretionary part.
How does this compare to the 4% rule?
The 4% rule aims to preserve the balance indefinitely, so it withdraws less. This deliberately spends the balance to zero over a set period, which produces a larger payment. On $500,000 over 20 years the difference is substantial — see our FIRE and savings drawdown calculators for the preservation approach.
What return should I assume?
Lower than during accumulation. Money being spent cannot ride out a downturn, so drawdown portfolios usually hold more bonds and cash. Something in the 3–5% range is a common planning figure, and testing a percentage point lower shows how sensitive the payout is.
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Disclaimer: DayCents provides this calculator for educational purposes only. Results are estimates based on your inputs and the stated assumptions — they are not financial advice, a quote, or an offer of credit. Consult a qualified financial professional before making major money decisions.