Annuity Payout Calculator
Converting a Lump Sum Into a Steady Income Stream
An annuity payout calculation answers a specific question: if I hand over a fixed amount of money today, how much can I draw out each period so the balance — plus the interest it earns along the way — is fully exhausted by the end of a chosen term? This is the same amortization math used for loan payments, run in reverse: instead of solving for a loan payment that pays off a debt, it solves for a withdrawal that pays out a principal.
The Formula
PV is the principal (lump sum), i is the interest rate per payment period, and n is the total number of payments. Payment frequency — monthly, quarterly, semi-annual, or annual — changes both i and n proportionally.
Where This Calculation Matters
- Structured settlement or lottery payouts — comparing a lump sum against an annuitized payout requires knowing exactly what periodic income that lump sum could generate.
- Insurance company annuity contracts — this is the same math insurers use internally to quote a fixed-period payout annuity.
- Retirement income planning — converting a portion of savings into a fixed-term payout can supplement Social Security or pension income for a defined number of years.
- Comparing payout terms — a shorter payout period produces a larger periodic payment but exhausts the principal sooner; longer terms lower the payment but stretch it further.
Monthly Payout on a $100,000 Principal at 5% Annual Interest
| Payout period | Monthly payment | Total paid out |
|---|---|---|
| 10 years | $1,060.66 | $127,279.20 |
| 15 years | $790.79 | $142,342.20 |
| 20 years | $659.96 | $158,390.40 |
| 25 years | $584.59 | $175,377.00 |
Total paid out rises with a longer term because more interest accrues on the shrinking balance over more periods, even though the monthly payment itself is smaller.
How to Use This Calculator
- Enter the principal or lump sum being annuitized.
- Enter the annual interest rate the balance is assumed to earn.
- Enter the payout period in years.
- Select the payment frequency — monthly, quarterly, semi-annual, or annual.
- Select Calculate to see the payout per period, total paid out, and total interest earned over the term.
Related Calculations
See how a balance grows before annuitizing it with the Retirement Savings Calculator, or combine this payout with other income sources using the Retirement Income Calculator.