Annuity payouts, in short
This calculator takes a lump sum, a fixed interest rate, and a number of years, and spreads that balance into equal periodic payments that fully deplete it by the end of the term — essentially a mortgage running backward, with you as the lender. A longer payout period means smaller checks but more total interest earned along the way; a shorter one means bigger checks and less total interest.
Key takeaways
- A $100,000 balance at 5%, paid out monthly over 20 years, generates about $659.96 a month — $158,389 total, including $58,389 in interest.
- Shortening that payout to 10 years raises the monthly check to about $1,061 but caps total interest at roughly $27,279; stretching it to 30 years drops the check to about $537 while total interest climbs to roughly $93,256.
- Payment frequency has a small but real effect: taking one annual payment instead of monthly ones lets the balance compound longer between withdrawals, raising the annualized total from about $7,919 to about $8,024 on the same $100,000.
- This tool assumes one fixed rate for the whole term, unlike a real insurance annuity payout, which is priced using mortality tables and your age when the payout is for life rather than a set number of years.
What this calculator actually solves
Think of it as a loan in reverse. Instead of borrowing money and paying it back with interest, you're starting with a balance and drawing it down with interest working in your favor — the balance keeps earning the assumed rate on whatever hasn't been paid out yet, right up until the last payment brings it to zero. It can also run the calculation the other way: given a periodic payment, it will tell you the present value (the lump sum needed to fund it) or the future value (what a stream of contributions grows to).
How the payout amount is calculated
The payout is the principal divided by the present-value-of-annuity factor for the periodic rate and total number of payments:
Payment = Principal ÷ [(1 − (1+r)^-n) / r]
With the calculator's defaults — $100,000 principal, 5% annual rate, 20 years, paid monthly — the periodic rate is 5% ÷ 12 ≈ 0.4167%, and there are 240 payments:
Monthly payout ≈ $659.96
Total received over 20 years ≈ $158,389.38
Of which interest ≈ $58,389.38
Longer payout period: smaller checks, more total interest
Spreading the same $100,000 at 5% over a different number of years trades check size for total interest earned:
10 years: ≈ $1,060.66/month → total interest ≈ $27,278.62
20 years: ≈ $659.96/month → total interest ≈ $58,389.38
30 years: ≈ $536.82/month → total interest ≈ $93,255.78
There's no free lunch here — a longer term earns more interest because the money sits invested longer, but it also means living on a smaller check for longer, which matters if the payout needs to cover a fixed set of expenses.
Why payment frequency changes your annual total
Withdraw less often and each remaining dollar has more time to earn interest before it's paid out, so the annualized total edges up. On the same $100,000 at 5% over 20 years, monthly payments add up to about $7,919 a year, quarterly payments to about $7,939, and one payment a year comes to about $8,024. The gap is modest, but it's a real, mechanical consequence of compounding — not a rounding artifact.
This calculator vs. a real insurance annuity quote
An actual insurance annuity payout — especially a lifetime-income option — isn't priced with a simple fixed-rate formula like this one. Insurers use mortality tables, your age, sometimes gender, and their own investment assumptions, because they're pooling longevity risk across every buyer: people who live longer than average are effectively subsidized by people who live shorter than average. This calculator's fixed-term, fixed-rate model is the right tool for understanding the underlying math and comparing your own payout scenarios — treat an actual insurer's quote as the number that matters when you're ready to buy a contract.
Related calculators
For the accumulation side of this same math — building toward a lump sum instead of spending one down — see the annuity calculator. The present value calculator and future value calculator cover single lump-sum scenarios, and if you're drawing down retirement accounts subject to required withdrawals, the RMD calculator handles that specific rule set.