Annuity Calculator
Calculate your annuity payout from a lump sum, project your savings growth, or find out how much you need for a target income — with live charts and a year-by-year schedule.
Used to show inflation-adjusted real value of future payments
* Estimates only. Assumes fixed rate throughout the term. Consult a financial advisor.
🔍 Types of Annuities — What You Need to Know
Fixed Annuity
Pays a guaranteed, fixed amount for a set number of years or for life. Best for conservative investors who prioritize stability and predictable income over potential growth.
Variable Annuity
Payments fluctuate based on the performance of underlying investments (stocks, bonds). Offers higher growth potential but carries market risk. Best for growth-focused investors.
Immediate Annuity
Begins paying out almost immediately after a lump-sum purchase — usually within 30 days. Ideal for retirees who need income right away from a pension lump sum or savings.
Deferred Annuity
Accumulates funds during a growth phase before converting to income payments later. Contributions grow tax-deferred. Best for pre-retirees still in their earning years.
Ordinary Annuity
Standard annuity structure where payments are made at the end of each period. Most loans, mortgages, and bonds use this structure. Slightly lower payment than annuity due.
Annuity Due
Payments are made at the beginning of each period. Since each payment is invested one period earlier, annuity due generates slightly more interest than ordinary annuity.
🧭 How to Use This Calculator
Annuity Payout: "I have $500,000 — how much monthly income does that give me?" | Savings Growth: "If I save $800/month for 25 years, how much will I have?" | Savings Goal: "I want $4,000/month — how much lump sum do I need?"
Type your lump sum (Payout/Goal) or regular contribution (Growth). Use today's dollars — the calculator adjusts for compounding automatically.
Enter the annual interest or return rate, how many years the annuity runs, and how often payments are made. Monthly compounding gives the most accurate real-world results.
Ordinary annuity (most common — payments at end of period) or Annuity Due (payments at beginning). The difference is one compounding period — often just a few percent difference in total.
Review your key metrics, explore the interactive chart (switch between Line and Bar views), and expand the year-by-year schedule to track every annual milestone.
Understanding Annuities: A Complete Guide
An annuity is a contract — typically with an insurance company or financial institution — that provides a series of regular payments over time. Annuities are one of the most powerful retirement planning tools available, offering the security of guaranteed income that you cannot outlive.
The Annuity Payout Formula Explained
The periodic payment from a lump sum is calculated using the present value annuity formula:
For example, $500,000 at 6% annual interest paid monthly over 20 years: r = 0.06/12 = 0.005, n = 240. PMT ≈ $3,582/month. Over 20 years you'd receive $859,680 total — $359,680 more than your original investment.
The Future Value (Savings Growth) Formula
If you invest $500/month at 7% for 30 years: FV ≈ $566,764. Your total contributions would be $180,000, and the remaining $386,764 represents pure compound interest growth — more than double your contributions.
How Payment Frequency Affects Your Returns
More frequent payment periods (monthly vs. annually) result in more compounding cycles per year. For a $500,000 annuity at 6% over 20 years: monthly payments yield ~$3,582/period, while annual payments yield ~$43,567/year ($3,630/month equivalent). The difference comes from how interest compounds between payments.
Annuity vs. Lump Sum: Which Is Better?
The choice depends on your life expectancy, risk tolerance, and financial needs. Annuities provide certainty — you'll never run out of money if the annuity is structured for life. A lump sum gives flexibility but requires disciplined investing. Many financial planners recommend a hybrid approach: annuitize enough to cover fixed living expenses, and invest the remainder for growth and flexibility.
Inflation and Annuities
One of the biggest risks to a fixed annuity is inflation. A payment of $3,000/month today will have significantly less purchasing power in 20 years if inflation averages 3%. Some annuities offer cost-of-living adjustment (COLA) riders that increase payments annually, but these typically come with lower initial payments. Our calculator lets you enter an inflation rate to see the real purchasing power of your future payments.
Frequently Asked Questions
Early withdrawal from a deferred annuity typically triggers surrender charges (usually 5–10% of the withdrawal amount, declining over time) and, if you're under 59½, a 10% IRS tax penalty in addition to ordinary income tax on gains. Most annuities allow up to 10% free withdrawal per year. Always check your contract's surrender schedule before withdrawing.
It depends on whether the annuity was purchased with pre-tax or after-tax dollars. For qualified annuities (funded with pre-tax money like an IRA), all payments are taxed as ordinary income. For non-qualified annuities (after-tax funds), only the earnings portion of each payment is taxable — the return of principal is tax-free. This is calculated using the IRS exclusion ratio.
The minimum investment varies by provider, but most insurance companies require a minimum of $5,000–$25,000 for an immediate annuity. Many deferred annuities allow you to start with as little as $2,500. As a rule of thumb, financial advisors recommend having at least $100,000–$200,000 to purchase an annuity that generates meaningful monthly income (typically $400–$700+/month depending on your age and prevailing interest rates).
A pension is a defined benefit plan provided by an employer — you receive a set monthly income in retirement based on salary and years of service. An annuity is a financial product you purchase yourself, often to supplement or replace pension income. Both provide regular income, but annuities are individually controlled and purchased, while pensions are employer-funded and managed. From a math perspective, they behave identically — both are streams of periodic payments.
Annuity interest rates are tied to prevailing bond yields and vary with market conditions. Fixed annuity rates in 2024 range from approximately 4% to 6.5% depending on term length and insurer. Variable annuities have no fixed rate. Generally, rates above 5% are considered favorable for fixed annuities. Always compare offers from multiple carriers, since rates vary significantly between providers for identical products.
It depends on the annuity type. Period-certain annuities guarantee payments for a fixed number of years — if you die before the period ends, remaining payments go to your beneficiaries. Life-only annuities stop at death with no survivor benefit but offer the highest monthly payments. Joint-and-survivor annuities continue payments to a spouse. Many deferred annuities allow you to name a beneficiary who receives the remaining account value. Always add a beneficiary designation to your annuity contract.