Annuity Payout Calculator
Calculate your periodic income from an annuity investment
Estimated Payout Per
Money Will Last For
Interest exceeds payout; principal will never be depleted.
Total Payout
Principal + Interest
Interest Earned
Growth over time
Estimated Depletion Schedule
| Period | Interest Earned | Principal Used | Remaining Balance |
|---|---|---|---|
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About Annuity Payout Calculator
What is an Annuity Payout?
An annuity is a financial product that pays out a fixed stream of payments to an individual, typically used as a primary source of cash flow for retirees. The Annuity Payout Calculator helps you determine how much income you can expect to receive periodically (monthly, quarterly, or annually) based on your initial investment and expected interest rate.
How It Works
There are two primary ways to calculate annuity payouts:
- Fixed Length (Period Certain): You decide how many years you want the payments to last. The calculator then determines how much you will receive in each period.
- Fixed Amount: You decide how much you want to receive in each period. The calculator then determines how long your money will last before the principal is exhausted.
Key Factors in Calculations
1. Principal Amount
This is the initial sum of money you invest in the annuity. A larger principal generally leads to higher periodic payments or a longer duration.
2. Annual Interest Rate
Even while you are receiving payments, the remaining balance in your annuity earns interest. A higher interest rate means your money grows faster, allowing for larger payouts or a longer-lasting fund.
3. Payout Frequency
Common frequencies include:
- Monthly: 12 payments per year
- Quarterly: 4 payments per year
- Annually: 1 payment per year
4. Duration/Time Horizon
For a 'Fixed Length' annuity, this is the number of years you expect to receive payments. For a 'Fixed Amount' annuity, this is the result calculated by the tool.
The Mathematical Formula
The formula for calculating a periodic annuity payment ($d$) is:
d = (P * r * (1 + r)^n) / ((1 + r)^n - 1)
Where:
- P = Principal amount
- r = Periodic interest rate (Annual Rate / Freq)
- n = Total number of payments (Years * Freq)
Types of Annuities
- Fixed Annuities: Provide a guaranteed payout for a set period or for life.
- Variable Annuities: Payouts vary based on the performance of underlying investments (like stocks or bonds).
- Immediate Annuities: Payments start right after the principal is deposited.
- Deferred Annuities: Payments start at a future date, allowing the principal to grow tax-deferred in the meantime.
Frequently Asked Questions
Can I outlive my annuity?
In a 'Fixed Length' or 'Fixed Amount' scenario, the annuity eventually reaches a zero balance. However, 'Life Annuities' (not covered by this simple calculation) guarantee payments for as long as you live, regardless of the balance.
Are annuity payouts taxable?
Generally, the portion of the payout that represents interest earnings is taxable as ordinary income. The portion that is a return of your principal is not taxed.
What happens to the money if I die?
Depending on the contract (like 'Period Certain'), remaining payments may go to your beneficiaries. Without such a provision, the insurance company may keep the remaining balance.
Disclaimer: This calculator is for educational purposes only. Annuity contracts are complex financial instruments with various fees, riders, and tax implications. Consult with a financial advisor before making investment decisions.