Annuity Payout Calculator — Monthly Income from a Lump Sum
Turn a lump sum into a stream of equal periodic payments. Enter the starting balance (present value), the annual interest rate credited by the annuity, the payout term and payment frequency to find the periodic income — and see how much of the total you receive is interest versus return of your own principal.
%
yrs
Payout frequency
Annuity type
Regular payment received each period for the full payout term
1,649.89
per periodOriginal principal
63.1%
Interest received
36.9%
- 1
Periodic interest rate
5% ÷ 100 ÷ 12 = 0.004167 - 2
Total periods
20 yrs × 12 = 240 - 3
Present value factor
1 − (1 + 0.004167) ^ −240 = 0.631355The denominator of the PMT formula — how much a future payment stream is worth today. - 4
Periodic payout
250,000 × 0.004167 ÷ 0.631355 = 1,649.89
How does this calculator work?
PMT = PV × r / [1 − (1 + r)^(−n)], where r = annual rate ÷ payout periods/year and n = total payout periods. A $250,000 annuity at 5% annual, paid monthly for 20 years gives PMT = $250,000 × (5%/12) / [1 − (1 + 5%/12)^(−240)] ≈ $1,650/month — receiving $396,000 in total, of which $146,000 is interest.
Formula
How this is calculated
A payout annuity works in reverse to a savings annuity: instead of building a pot through regular deposits, you draw down a pot through regular withdrawals. Each period the remaining balance earns interest at the periodic rate r (annual rate ÷ periods per year), and then a payment PMT is deducted. The present-value formula for an ordinary annuity PMT = PV × r / [1 − (1 + r)^(−n)] is derived by solving the standard loan/annuity equation for the payment — it is mathematically identical to a mortgage payment formula.
If you choose annuity due, the payment is received at the start of each period rather than the end. Because the balance earns one less period of interest before each withdrawal, each payment is slightly smaller: PMT_due = PMT_ordinary ÷ (1 + r). For most pension and insurance products, ordinary annuity (end-of-period) is the standard.
The donut chart splits the total you receive between your own principal returned and the interest the annuity generates. A higher interest rate or longer term means a greater share comes from interest, which is why an annuity can pay out more in total than the initial lump sum. All figures are pre-tax; actual after-tax income depends on the tax treatment of annuity payments in your jurisdiction.
Frequently asked questions
This calculator solves for the payment given a fixed term. To find the term for a fixed payment you would need to rearrange the formula: n = −ln(1 − PV × r / PMT) / ln(1 + r). If PMT exceeds PV × r (the periodic interest), the balance will eventually deplete; if PMT ≤ PV × r, withdrawals can continue indefinitely (a perpetuity).
Mathematically they use the same PMT formula. The difference is conceptual: with a mortgage you receive a lump sum now and make payments to the lender; with a payout annuity you hand over a lump sum now and receive payments from the provider. The arithmetic is identical — a $250,000 annuity at 5% for 20 years pays the same periodic amount as a $250,000 mortgage at 5% for 20 years.
Yes — this calculator models a fixed-term (or "period certain") annuity where payments continue for exactly the specified number of years and the balance reaches zero at the end. Life annuities, which pay until death regardless of how long you live, are priced differently and require actuarial tables not included here.
Also known as
TG we-Calculate Editorial Team. (2026). Annuity Payout Calculator — Monthly Income from a Lump Sum [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/annuity-payout-calculator
TG we-Calculate Editorial Team. "Annuity Payout Calculator — Monthly Income from a Lump Sum." TG we-Calculate. 2026. https://we-calculate.com/calculator/annuity-payout-calculator.
TG we-Calculate Editorial Team, "Annuity Payout Calculator — Monthly Income from a Lump Sum," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/annuity-payout-calculator
@misc{wecalculate_annuity_payout_calculator, title = {Annuity Payout Calculator — Monthly Income from a Lump Sum}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/annuity-payout-calculator}}, year = {2026}, note = {TG we-Calculate} }
Did this calculator help you?