See the monthly income a lump sum can provide over a set number of years.
Calculated locally in your browser.
How is an annuity payout calculated?
Payment = P × r ÷ (1 − (1 + r)⁻ⁿ), where r is the monthly interest rate and n the number of monthly payments. This models a self-funded drawdown while the balance keeps earning interest. For example, 500,000 at 5% paid out over 20 years provides roughly 3,300 per month. A commercial annuity may pay differently after fees.
Understanding your result
This models a self-funded drawdown. A commercial annuity may pay differently after fees and guarantees.
Formula and method
Payment = P × r ÷ (1 − (1 + r)⁻ⁿ), where r is the monthly rate and n the number of monthly payments.
Assumptions and limitations
This is an estimate for general guidance only and not financial or investment advice. It models a self-funded drawdown at a fixed rate; a commercial annuity may pay differently after fees, guarantees and mortality assumptions. Real returns vary, inflation reduces buying power, and your outcome depends on your circumstances, so consult a qualified professional before deciding.
Worked example
500,000 at 5% paid out over 20 years provides roughly 3,300 per month.
How to use this tool
- Enter the starting amount.
- Enter the annual interest rate and payout period.
- Press Calculate.
About the Annuity Payout Calculator
The Annuity Payout Calculator estimates the steady monthly income a lump sum can pay out over a chosen number of years while the balance keeps earning interest.
Who should use this tool
People planning retirement drawdown or anyone with a lump sum wanting to estimate the steady monthly income it could provide over a set number of years while the balance keeps earning interest. Useful for comparing payout lengths and interest assumptions when thinking through how to turn savings into regular income.
Benefits
- Estimates a steady monthly income from a lump sum
- Accounts for interest still earned on the balance
- Lets you test different terms and rates
- Private, browser-based and free with no account
Practical use cases
- Estimating monthly income from retirement savings
- Comparing a 15, 20 or 25-year payout
- Seeing how the interest rate changes the payment
- Sketching a drawdown plan before seeking advice
Frequently asked questions
Does the money run out?
Yes — this calculation fully draws the balance down to zero over the chosen period. A perpetual income would pay less.
Does the balance run down to zero?
In this fixed-term drawdown model, yes. The calculation pays out a level monthly amount so that the lump sum, together with the interest it earns along the way, is fully used up by the end of the number of years you choose. Choosing a longer term lowers each monthly payment.
How does the interest rate affect the monthly payout?
A higher assumed rate means the remaining balance earns more each month, so it can support larger payments over the same period. A lower rate produces smaller payments. Because the rate is an assumption you enter, the estimate is only as reliable as that figure proves to be.