The formula
How it works
Find out how much income you can draw from a lump sum over a set number of years, while it keeps earning interest. This is the payout side of an annuity — turning a nest egg into a steady stream of payments.
FAQ
Does the balance run out?
Yes — this calculates the payment that exactly empties the balance over the chosen period. If you want the money to last indefinitely, you would draw only the interest instead, leaving the principal untouched.
Why can I withdraw more than the balance divided by years?
Because the money that has not yet been withdrawn keeps earning a return. That growth lets you draw a bit more each year than simply splitting the balance evenly would allow.
What if my actual return is lower than assumed?
The payout is only exact for the return you enter. If the real return comes in lower, the fixed payment you chose will draw the balance down faster and it could run out before the period ends.
Does this account for inflation?
No — the payout figure is in today’s dollars and stays level in nominal terms. Rising prices will erode its purchasing power over a long payout period, so some retirees plan for payments that grow over time instead.
Are the payouts taxed?
This calculator does not apply any tax. Whether withdrawals are taxable, and how much, depends on the type of account the money sits in and your local tax rules.
How is this different from a lifetime annuity?
This model pays out over a fixed number of years you choose, so it can run out. A lifetime annuity from an insurer instead guarantees payments for as long as you live, pooling longevity risk across many people, usually at a lower payment for the same balance.
Can I change the payout period after starting?
This tool just models a chosen period; a real drawdown plan is usually flexible and lets you adjust withdrawals as circumstances change. Recalculate here whenever your balance, return assumption or remaining timeframe changes.
About the annuity payout calculator
This calculator works out how much you can withdraw from a lump sum each period so that it lasts for a chosen number of years, assuming the remaining balance keeps earning a return. It is the payout, or decumulation, side of an annuity — the mirror image of building savings up. Retirees and anyone drawing down a pot of money use it to turn a balance into a predictable income.
How to use it
Enter the starting balance, the annual return you expect the money to keep earning, and the number of years you want the payouts to last. The calculator returns the payment you can draw each year, and the total you will receive over the whole period. For example, $500,000 earning 5% over 20 years supports an annual payout of about $40,100 — more than $800,000 in total, thanks to the interest earned along the way.
The formula
The payout uses the same formula as a loan payment, since a payout is essentially the reverse of a loan: , where is the starting balance, is the return per period and is the number of payouts. The formula finds the fixed payment that draws the balance down to exactly zero after periods, accounting for the interest the remaining balance keeps earning.
Where it is used
Retirees use it to plan a sustainable income from their savings, and it is the maths behind fixed-term annuity products sold by insurers. Financial planners use it to model drawdown strategies, and it helps compare taking a lump sum against a stream of payments. Because it captures both the withdrawals and the ongoing growth, it gives a realistic picture of how long a pot of money will last.