Annuity Payout / Present Value Calculator
Understand the trade-off between a stream of fixed payments and the lump sum required today. By applying a discount rate and time horizon, you’ll see how present value and payout size relate—useful for retirement income planning, pension options, lottery/settlement offers, or evaluating insurer quotes.
The Annuity Payout Calculator lets you test “how much income can this principal support?” or “how much principal do we need for a target payment?” The goal is to set expectations with real numbers, compare scenarios side-by-side, and make confident decisions about guaranteed income versus investing the funds yourself. Explore different rates and terms to see the sensitivity and pick a plan that matches your timeline and risk comfort.
We can either compute a fixed periodic payout from a lump sum or the principal required to fund a target payment—over your chosen years and rate.
We use standard time-value formulas for an ordinary annuity (end-of-period) or an annuity due (beginning-of-period). Choose what to solve for and we’ll update results instantly.
Total paid out over the term
Total interest earned over principal
Inputs summary
- Mode: Solve for payout
- Timing: Ordinary (end)
- APR: 5.00% • Per-period rate: 0.4167%
- Tenor: 25 years • 300 periods at 12/yr
Totals
- Periodic payment: $2,922.95
- Present value (principal): $500,000.00
- Total distributed: $876,885.06
- Interest component: $376,885.06
We assume a level payment and constant effective rate per period. Taxes, fees, inflation differences, and market variability are not included.
Results interpretation
How it works
Formulas, assumptions, limitations
Ordinary annuity (end-of-period). Payment = PV × r / (1 − (1 + r)^(−n)). Present value = Payment × (1 − (1 + r)^(−n)) / r.
Annuity due (beginning-of-period). Multiply the ordinary result by (1 + r) when solving for PV, or divide by (1 + r) when solving for payment.
Zero rate special case. If r = 0, payment = PV / n and PV = payment × n.
Rates & periods. We convert APR to a per-period rate r = APR/ppy, where ppy is payments per year. Total periods n = years × ppy.
What’s excluded. We ignore fees, inflation adjustments, taxes, step-up payments, and market variability.
Use cases & examples
With $500,000 at 5% APR for 25 years, monthly (12/yr) ordinary timing, the payout is sized so the balance winds down to $0 after 300 payments.
To receive $2,500 per month for 25 years at 5% APR, we compute the present value today. Annuity-due timing raises the PV compared to ordinary.
Switch payments per year to 4 to see how a quarterly cadence changes the payout and totals at the same APR and years.
Annuity FAQs
What is the difference between ordinary and annuity due?
Ordinary pays at the end of each period; annuity due pays at the beginning. Annuity due is slightly more valuable because each payment happens one period earlier.
Does APR equal APY here?
We use APR divided by payments per year to get a per-period rate. If you prefer APY, convert it to an equivalent periodic rate first.
Can this model variable returns?
No. We assume a constant effective rate per period. For market portfolios, treat results as an approximation.
What if I want the balance to end above zero?
Increase years or lower the payout to leave a residual, or shorten years / raise payout to draw down faster.
Designing a reliable payout stream
Annuities—whether purchased contracts or DIY drawdown plans—trade a principal today for a sequence of future payments. The core questions are simple: How much can we pay ourselves each period, and how much principal do we need to safely fund that payout for the years we choose?
Picking cadence and timing
Monthly payments (12/yr) are common for retirees matching bill cycles, while quarterly or annual distributions may suit endowments. If payments arrive at the beginning of each period (annuity due), each dollar starts working sooner, so the present value increases versus an end-of-period schedule.
Rate realism
A stable per-period rate is an abstraction. For bonds and CDs, it’s a decent stand-in. For diversified portfolios, we can treat results as a planning baseline and stress-test with lower and higher rates.
Integrating with a retirement plan
- Pair this with our Safe Withdrawal Rate and FIRE tools for target sizing.
- Layer guaranteed income (pensions, Social Security) before sizing portfolio payouts.
- Maintain a cash buffer so market swings don’t force selling at lows.
Common pitfalls
- Using APY directly with a monthly cadence without converting to a per-period rate.
- Ignoring fees and taxes, which can materially change the sustainable payout.
- Setting years too long for the chosen rate and payout, leaving the balance negative before the end.
Next steps
Once we’re comfortable with a payout and horizon, we can create a policy: when to adjust payments, how often to revisit the rate assumption, and how to respond if markets underperform. Consistency beats ad-hoc changes.