Retirement calculator

Free annuity calculator

Turn a lump sum of retirement savings into guaranteed monthly income. Enter a premium, an interest rate, and a payout period, and this annuity calculator shows the monthly payment your money can support — updated live, as you type.

On this page12 sections

Results are estimates. Consult a professional.

Overview

What this retirement annuity calculator does

A retirement annuity turns a lump sum of savings into a stream of guaranteed monthly income. This annuity calculator answers the decumulation question every retiree faces: if I hand over this much money, how large a monthly check can it pay for a set number of years? Enter the premium, an interest rate, and a payout period, and it returns the monthly payment instantly.

It is the mirror image of saving. While a future-value calculator grows regular contributions into a balance, this tool runs the balance back down: it amortizes a single lump sum into equal monthly payments, with each payment covering both interest and a slice of the original principal until the money is exhausted at the end of the term.

This calculator models a period-certain payout — income for a fixed number of years that you choose. It does not model a lifetime annuity (paid until death), and it is not the same as a fixed, immediate, or variable insurance annuity. For those product-specific tools, see the linked insurance calculators below.

The lump sum you convert into income — for example, a 401(k) or IRA rollover used to buy the annuity.

The number of years the income stream lasts. At the end of the period the principal is fully paid out.

The annual rate the unpaid balance earns during the payout period, applied monthly.

The fixed amount paid each month, covering interest plus return of principal.

Formula

How the annuity payment is calculated

The calculator uses the standard annuity (amortization) formula — the same math that sets a mortgage payment, run in reverse. It solves for the level monthly payment that drains a starting balance to zero over the payout period:

monthly = P × r / (1 − (1 + r)^−n)

r = annual rate ÷ 12 (monthly rate)

n = payout years × 12 (total payments)

The result is a self-liquidating stream: unlike a 4%-rule withdrawal that aims to preserve principal, this payout deliberately spends the whole lump sum across the chosen term. A longer payout period spreads the same premium over more months, so each check is smaller; a higher rate lets the balance earn more while it is paid out, so each check is larger.

Inputs

How to use the annuity calculator

Premium / lump sum. The amount of savings you are converting into income — your rollover balance or the cash you would pay an insurer.
Interest rate. The annual rate the balance earns during the payout. Match it to what a comparable fixed annuity or bond ladder is paying; the default 4% is a reasonable mid-range figure.
Payout period. How many years you want the income to last. Shorter terms pay more per month but stop sooner; longer terms stretch a smaller check across more years.

The result shows the monthly payment the premium can support. Because the model is period-certain, picking the payout period is really a bet on how long you need the income — which is why retirees often compare it against their life expectancy before committing.

Worked example

A worked example using the annuity calculator

Example: $250,000 over 20 years at 4%

Marie rolls a $250,000 retirement balance into an annuity and wants a fixed monthly income for 20 years, with the balance earning 4% a year. Here is how the calculator works it out — these are the widget's default inputs.

Step 1 — Convert the rate and term

The monthly rate is 4% ÷ 12 = 0.3333% (r = 0.0033333). The number of payments is 20 × 12 = 240.

Step 2 — Apply the formula

monthly = 250,000 × 0.0033333 / (1 − 1.0033333^−240)

monthly = 833.33 / 0.550178

monthly = 1,514.95

Step 3 — Read the result

$1,514.95 / month

Marie's $250,000 supports $1,514.95 a month for 20 years. Over the full term she receives about $363,588 — roughly $113,588 of which is interest the balance earned while it was being paid down. The principal hits zero at the last payment.

Stretch the payout to 30 years and the same premium pays about $1,193.54 a month; shorten it to 10 years and it pays about $2,531.13. The trade-off between check size and how long the income lasts is the whole decision.

Reference

Monthly income from a $250,000 annuity

The table holds the premium at $250,000 and varies the rate and payout period so you can see how each lever moves the monthly check. All figures are computed by this calculator using the formula above.

Payout period	At 3%	At 4%	At 5%
10 years	$2,414.02	$2,531.13	$2,651.64
15 years	$1,726.45	$1,849.22	$1,976.98
20 years	$1,386.49	$1,514.95	$1,649.89
25 years	$1,185.53	$1,319.59	$1,461.48
30 years	$1,054.01	$1,193.54	$1,342.05

$250,000 premium, period-certain payout. Figures computed by this calculator.

Notice that adding years shrinks the check faster than raising the rate grows it. Over long horizons, the payout period is the dominant lever — which is why matching it to a realistic time horizon matters more than chasing a slightly higher rate.

Context

How this differs from fixed, immediate, and variable annuities

The word "annuity" covers two different things. In time-value-of-money math, an annuity is any stream of equal payments — which is what this calculator models. As a retail insurance product, an annuity is a contract you buy from an insurer that promises income, often for life. Those product types live in our insurance section because their pricing, fees, and guarantees come from the contract, not a simple formula.

Fixed annuity — a guaranteed rate for the payout period. Closest to this calculator's model. See the fixed annuity calculator.
Immediate annuity — payments begin right after you pay the premium, often for life. See the immediate annuity calculator.
Variable annuity — payments rise and fall with investment subaccounts, and carry surrender charges and fees. See the variable annuity calculator.

Annuities sold by insurers are complex contracts. FINRA and the SEC both urge buyers to understand the fees, surrender periods, and guarantees before purchasing — this calculator is a planning estimate of the income a lump sum can produce, not a quote for any specific product.

FINRA — Annuities (types, features, and what to weigh before buying).U.S. SEC, Investor.gov — Annuities.

Taxes & rules

Taxes, the 10% penalty, and RMDs on a retirement annuity

How an annuity's payments are taxed depends on how it was funded. A qualified annuity bought inside a 401(k) or traditional IRA is funded with pre-tax money, so each payment is fully taxable as ordinary income. A non-qualified annuity bought with after-tax money is taxed only on the earnings portion of each payment; the return of your original principal is tax-free.

10% early-withdrawal penalty. Money taken from a qualified annuity before age 59½ is generally hit with a 10% additional tax on top of ordinary income tax, unless an exception applies.
Required minimum distributions. A qualified annuity is subject to RMDs once you reach age 73 under SECURE 2.0 (rising to 75 in 2033); the income payments often satisfy the RMD for that account.
Surrender charges. Cashing out an insurance annuity early can trigger steep surrender fees set by the contract — separate from any IRS penalty.

IRS — Publication 939, General Rule for Pensions and Annuities (taxable vs. tax-free portion of payments).IRS — Retirement topics: exceptions to tax on early distributions (10% additional tax before 59½).IRS — Retirement plan and IRA required minimum distributions (RMD age 73 under SECURE 2.0).

Pitfalls

Common mistakes and what this estimate leaves out

It is period-certain, not lifetime. The income stops at the end of the payout period. If you outlive a 20-year term, the money is gone — a real lifetime annuity from an insurer keeps paying until death.
No inflation adjustment. The monthly check is level in nominal dollars; its buying power falls each year. A $1,515 payment in year 20 buys far less than in year 1.
No fees or surrender charges. Real annuity contracts carry costs that reduce the payment an insurer will actually quote.
The rate is an assumption. Use a rate you could genuinely lock in; an optimistic figure overstates the income.

Treat the result as a planning estimate, not a guarantee or a product quote. To project the balance you would have before buying an annuity, use the future value of an annuity calculator; to size sustainable income from a portfolio you keep invested, see the retirement income calculator.

Questions

Frequently asked questions about the free annuity calculator

An annuity calculator is a free online tool that helps you calculate monthly payment from a lump-sum annuity premium. Convert a lump sum into a stream of guaranteed monthly payments. It runs entirely in your browser with instant results and no sign-up.

It depends on the rate and how long you want the income to last. At a 4% rate paid over 20 years, $250,000 supports about $1,514.95 a month. Stretch the same premium over 30 years and it pays roughly $1,193.54; shorten it to 10 years and it pays about $2,531.13. The calculator applies the formula monthly = P × r / (1 − (1 + r)^−n).

With the amortization formula monthly = P × r / (1 − (1 + r)^−n), where P is the premium, r is the annual rate divided by 12, and n is the number of years times 12. It solves for the level monthly payment that draws the premium down to exactly zero over the payout period. At a 0% rate it simplifies to the premium divided by the number of months.

This calculator models a period-certain income stream using a simple formula. A fixed, immediate, or variable annuity is a contract you buy from an insurer, with its own fees, surrender charges, and guarantees set by the contract rather than a formula. Those product-specific tools live in our insurance section; FINRA and the SEC both urge buyers to understand the fees and terms before purchasing.

No. It models a period-certain payout — income for the fixed number of years you enter, after which the money is gone. A true lifetime annuity from an insurer keeps paying until death and is priced using actuarial life expectancy, which this calculator does not model.

It depends on how the annuity was funded. Payments from a qualified annuity (bought with pre-tax 401(k) or IRA money) are fully taxable as ordinary income. With a non-qualified annuity (after-tax money) only the earnings portion is taxed and the return of your principal is tax-free. Withdrawals before age 59½ may also face a 10% early-withdrawal penalty. See IRS Publication 939.

About

About this annuity calculator

This annuity calculator runs entirely in your browser — every figure you enter stays on your device and nothing is sent to a server. It applies the standard amortization formula monthly = P × r / (1 − (1 + r)^−n), converting your annual rate and payout period to a monthly rate and payment count, and updates the result instantly as you type.

Calculators Cloud offers 400+ free tools with no sign-up. The full retirement calculators shelf includes the annuity payout, pension, and retirement income tools alongside this one. Or browse the full calculator directory.