What an annuity payout estimate means
An annuity payout estimate answers a plain question: if you hold a lump sum and take regular withdrawals from it, how large can each withdrawal be, or how long will a chosen withdrawal last? This calculator treats the money as a finite balance that earns a constant return. You enter the starting balance, an effective annual return, how often you are paid, and either the number of years or the withdrawal you want. The result is a level payment or a payoff time, plus a balance schedule that you can read line by line and download.
It is deliberately a transparent drawdown model, not an insurance quote. A lifetime annuity sold by an insurer is priced from mortality tables, the insurer's costs and the interest rates available when you buy, and it can promise income for as long as you live. Nothing like that is calculated here. The default example is a 120,000 balance, a 6% effective annual return, monthly payments for 10 years and payments at the end of each month. On those inputs the calculator returns a level withdrawal of 1,322.69, so you take out 158,722.60 in total, of which 38,722.60 is growth the balance earned along the way.
The figures are nominal and before tax. They do not include inflation, insurance charges, account fees or changes in your withdrawals over time, and the currency selector only changes the label on the numbers. Treat the output as a planning illustration that shows how balance, return, length and timing interact, and compare it with written quotes before you rely on it for a real decision.
Think of the output as the answer to one planning question rather than a prediction. If you are comparing a lump-sum option with an income option, or deciding how much of a pension pot to draw each year, the useful figure is the payment you can support under a stated return and length, together with how sensitive it is to those assumptions. On the default balance, a return of 3% gives 1,156.49 a month and 8% gives 1,438.29, so a five-point difference in the assumed return moves the payment by 281.80. That spread is the real message: treat any single number as one point in a range, not as a promise.
Fixed duration versus fixed payment
The first mode fixes the length and solves for the payment. Choose it when you know how many years the money has to cover, for example a bridge between early retirement and a pension that starts later, or a fund meant to pay a set of annual costs. Enter the years and the calculator spreads the balance, plus the growth it earns, evenly across every payment. At 6% over 10 years the monthly figure is 1,322.69; stretching the same balance to 20 years lowers it to 848.75, about 64% of the 10-year figure rather than half, because the balance keeps earning while it waits.
The second mode fixes the payment and solves for the length. Choose it when you have a withdrawal in mind and want to know how long it could last. With 1,500.00 a month from the same 120,000 balance at 6%, the money lasts 102 payments, which is 8.50 years: 101 full withdrawals and a smaller final one of 893.59. The calculator never lets the balance go negative. When what is left is less than a full withdrawal, it pays out the remainder as a separate final amount and says so.
The two modes are two views of one equation, so they agree with each other. Take the 1,322.69 level payment from the first mode, enter it as the withdrawal in the second, and the balance runs out after 120 payments. Use the first mode to design a plan and the second to stress a plan you already have, for example by asking how much sooner the money ends if you raise the withdrawal by a few hundred. Both modes accept the same six payout frequencies: monthly, twice a month, every two weeks, quarterly, twice a year and annually.
Payment frequency changes the number of payments but not the idea. With quarterly payments the 10-year example gives 3,987.41 per quarter, which is 15,949.64 a year against 15,872.26 a year when paid monthly. The yearly total is slightly higher with quarterly payments, because each payment arrives later and the balance has to make up for the extra waiting.
A third way to use the tool is to test a plan you already follow. Withdrawing 1,000.00 a month from the same 120,000 at 6% lasts 181 payments, which is 15.08 years, against 10 years for the 1,322.69 level payment. The extra years cost 322.69 less each month, which is the trade you make by choosing a smaller withdrawal. The payment also scales with the balance: half the balance, 60,000, gives half the payment, 661.34, because the formula is linear in the starting amount.
Formula, annual return and payment timing
Inputs and units
The return you enter is an effective annual rate: the growth in a full year after compounding. The calculator converts it to a rate for each payment period with q = (1 + r)^(1/m) - 1, where r is the annual return as a decimal and m is the number of payments a year. For 6% and monthly payments, q is 0.486755% a month. Starting from an effective annual rate means a 6% return grows the balance by exactly 6% over twelve months whatever the payment frequency, so changing the frequency does not accidentally change the return.
With N payments in total, payments at the end of each period and a starting balance B, the level payment is B × q ÷ (1 - (1 + q)^(-N)). That is the standard ordinary-annuity payment formula: the payment is the balance divided by the present value of one unit paid N times. The same arithmetic is behind the loan payment formula, run in the other direction, and you can explore time value of money problems like this one with the financial-calculator keypad on this site.
Timing and assumptions
Timing matters because a withdrawal taken at the start of a period leaves less money to grow during that period. For a beginning-of-period schedule the level payment is the end-of-period payment divided by (1 + q). On the default inputs that changes 1,322.69 into 1,316.28, a difference of 6.41 a month, because every payment is taken one period earlier and so has less time to earn. The schedule for a beginning-of-period plan shows the balance after the withdrawal and then the growth on what remains.
The model assumes a constant return, equal-length periods, withdrawals that never change, and no taxes, fees or inflation. Real returns vary from year to year, and the order of good and bad years matters a great deal when you are withdrawing, a point taken up below.
Payout frequency also changes the length of the schedule. For biweekly payments the period rate is 0.224363% and 10 years means 260 payments of 609.67. Those 26 payments a year add up to 15,851.51 against 15,872.26 a year for monthly payments, so the yearly total differs slightly even though the balance and the return are the same: money paid at different points in the year has had different amounts of time to grow.
Boundary cases
At a 0% return nothing grows, so the payment is the balance divided by the number of payments: 1,000.00 a month on 120,000 over 120 months. A negative return is allowed down to -99%; at -3% the same 10-year plan needs 854.34 a month, more than the 1,000.00 at zero, because the balance shrinks while you draw on it. A starting balance of 0 gives 0 payments, and a withdrawal of 0 never depletes anything, so the calculator shows the balance without withdrawals instead of inventing a payoff date. Years multiplied by payments a year must be a whole number of payments, with at most 1,200 payments in a schedule.
Worked withdrawal example and balance schedule
Enter these inputs
Choose the fixed-length mode and enter a starting balance of 120,000, an effective annual return of 6%, 10 years, monthly payments and end-of-period timing. These are the defaults, so the page already shows this case before you press Calculate. They are an illustration, not a forecast of what any account will earn.
Read the output
The level withdrawal is 1,322.69 a month for 120 payments, 158,722.60 in total. The annual table shows how the balance moves: in year one it opens at 120,000.00, earns 6,768.10, pays out 15,872.26 and closes at 110,895.85. In the early years a larger share of each withdrawal is growth; as the balance shrinks, growth shrinks with it and a rising share of each payment comes out of the principal. By the final payment the balance reaches exactly zero; the schedule keeps full precision and rounds only for display, so the last payment can differ from the others by a cent or less in the CSV.
The schedule table lists every payment with its opening balance, growth, withdrawal and closing balance, and the chart plots the balance against cumulative growth and cumulative withdrawals. The CSV download carries the same rows with the payment timing and return stated in the columns, so a spreadsheet can reproduce the figures.
Change one assumption
Switch to beginning-of-period payments and the withdrawal falls to 1,316.28. Switch to the fixed-payment mode, enter 1,500.00 and the plan lasts 8.50 years instead of 10. Enter 2,500 at a 0% return with 1,000.00 withdrawals and you get two full payments and a final payment of 500.00. Change one input at a time and watch which result moves; the result is hidden after every edit until you press Calculate again, so a figure on screen always matches the inputs beside it.
To see how sensitive a plan is, change one input at a time and keep a record. Moving the return from 6% to 3% takes the payment from 1,322.69 to 1,156.49; moving it to 8% raises it to 1,438.29. Moving the length from 10 to 20 years takes it to 848.75, and moving to beginning-of-period timing takes it to 1,316.28. Set these side by side and the pattern is clear: the return and the length move the payment far more than the timing does. The annual table in the CSV shows the same plan year by year, so you can see in which year the balance falls below half of its starting value and decide whether that pace is acceptable to you.
Why money can last longer, run out, or face market risk
Whether a balance lasts depends on the withdrawal compared with the growth. If a withdrawal is no larger than what the balance earns in one period, the balance does not fall in this model. On the default balance and return, one month of growth on 120,000 is 584.11. A withdrawal of 584.10 does not deplete the balance in the model (the calculator labels it as not depleting), while 584.12 slowly wears it down and, because the decline is so slow, is still not exhausted within the 1,200-payment horizon (the calculator labels this as not depleted within the modeled horizon). Those are two different statements: one is a property of the arithmetic, the other is a limit on how far the schedule is carried.
The first statement is a feature of a constant return, not a promise. Real portfolios do not earn the same return every year, and withdrawals during a decline lock in losses that later gains cannot fully repair. Two people who withdraw the same amount from the same balance and earn the same average return can finish with very different results depending on when the bad years fall. The test withdrawal sequence risk calculator shows that effect, and it is the main reason to treat any constant-return answer as a central case rather than a floor.
Other risks sit outside the model. Inflation raises the cost of living while a level withdrawal stays the same, so the buying power of each payment falls over a long payout. Taxes reduce what you keep. Fees reduce the return you earn. And a plan that ends in a set number of years leaves a question about what happens afterwards, which is where pensions, social benefits or a lifetime annuity may play a role. To place this calculation in a larger plan, estimate wider retirement needs and compare the resulting income with your spending.
There are practical ways to manage these risks without a forecast. Plan with a return below the one you hope for: using 3% instead of 6% reduces the supportable withdrawal by about 13%, from 1,322.69 to 1,156.49 a month, and anything you can safely take above that is a bonus. Keep some money outside the plan as a reserve for expenses that arrive unexpectedly. Review the plan every year, comparing the actual balance with the modeled one, and rerun the calculator from the new balance rather than waiting until the gap is large. A model that you update is far more useful than a number you calculated once.
Annuity payout questions
Is this a lifetime annuity quote?
No. It models a finite investment balance and an assumed return, without insurer mortality pricing, so it cannot say what an insurer would pay for life. Ask providers for written quotes if you are considering one.
What happens at zero return?
The principal is spread evenly across all the payments with no modeled investment growth, so a balance of 120,000 over 120 payments is 1,000 each.
Can a balance last indefinitely?
Some constant-return scenarios never deplete, for example when each withdrawal is no larger than a period of growth. That is a property of the model, not a real-world guarantee, because actual returns vary.
Why does payment timing matter?
Beginning-of-period payments remove capital earlier and leave less to earn the period return, so the level payment you can afford is smaller than with end-of-period payments.
Does this account for inflation and taxes?
No. The figures are nominal, pretax withdrawals, and both adjustments are explicitly excluded, so real spending power and after-tax income will be lower than the numbers shown.