Annuity Calculator
An annuity solves a specific worry in retirement: running out of money while you're still alive. It converts a lump sum into a fixed, predictable monthly payment for a set period — this calculator estimates roughly what that monthly payment would be for a given principal, rate, and term.
Enter your details to see your payment amount.
How to use this calculator
- Enter the lump sum you're considering converting into an annuity.
- Enter the annuity's interest rate and payout period.
- Click "Calculate my payout" to see the fixed monthly payment you'd receive.
How the calculation works
This uses the standard fixed-payment annuity formula: your principal is spread across the payout period, with interest earned each month on the remaining balance factored into the payment amount. The math is the same used for a mortgage or loan payment, just running in the opposite direction — instead of borrowing and paying down a balance, you're depositing a lump sum and drawing it down through equal monthly payments until it reaches zero at the end of the term.
A worked example
Say you convert a $200,000 lump sum into a fixed annuity paying 5% annually over a 20-year term. That works out to a monthly payment of roughly $1,320 — totaling about $317,000 paid out over the full term, meaning roughly $117,000 of that is interest earned on top of your original principal. Shorten the term to 10 years with the same principal and rate, and the monthly payment roughly doubles to around $2,120, since the same amount is being distributed over half the time.
Frequently asked questions
Does this reflect a real insurance company quote?
No — actual annuity quotes include fees, insurer-specific pricing, and product features that vary significantly. Use this as a rough estimate before comparing real quotes.
What is the difference between a fixed and variable annuity?
A fixed annuity pays a guaranteed rate, like this calculator assumes. A variable annuity's payout depends on underlying investment performance and is not modeled here.
Are annuity payments taxed?
Often yes, at least partially — tax treatment depends on whether the annuity was purchased with pre-tax or after-tax money. Consult a tax professional for your specific situation.
What is the difference between an immediate and deferred annuity?
An immediate annuity begins payments right away, typically within a year of purchase. A deferred annuity has an accumulation phase first, where the lump sum grows before payments eventually begin — this calculator models the payout phase itself, not a deferral period.
What happens to the money if I die during the payout term?
It depends on the payout option chosen — a "period certain" option continues remaining payments to a named beneficiary, while a "life-only" option generally stops payments at death. Review your specific contract's terms.
Should I put my entire retirement savings into an annuity?
Most financial planners suggest annuitizing only a portion of retirement savings — enough to cover essential fixed expenses — while keeping the rest invested for growth and flexibility.