An annuity is a financial product, often sold by insurance companies, that you purchase with a lump sum of money in exchange for a series of regular payments over a set period or for life. This calculator models a basic 'annuity certain', where payments are made for a fixed number of years.

How does the rate of return affect my payout?

The rate of return is crucial because your remaining nest egg continues to be invested and grow even as you withdraw from it. A higher rate of return will allow for larger monthly payouts or make your money last longer. Conversely, a lower-than-expected return could cause your funds to deplete faster.

Is this payout adjusted for inflation?

This calculator calculates a fixed nominal payout, meaning the dollar amount is the same each month. It does not automatically adjust for inflation. The purchasing power of your monthly payout will decrease over time due to inflation.

Pension & Annuity Payout Calculator

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Total Interest Earned

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Turning Your Nest Egg into a Paycheck

You've spent decades diligently saving and investing, building a substantial nest egg for retirement. Now comes the big question: how do you turn that pile of money into a steady, reliable income that will last for the rest of your life? This is the core challenge of the "distribution" phase of retirement.

This calculator helps you solve that puzzle. It models how your savings can be "annuitized"—that is, converted into a series of fixed payments. By entering your total savings and a few key assumptions, you can see the **Monthly Payout** you can expect to receive. You'll also see how much **Total Interest** your money continues to earn even as you withdraw it, demonstrating the importance of staying invested during retirement.

More Retirement Planning Tools

Retirement Calculator: The perfect "before" to this calculator's "after." Use it to determine how large a nest egg you need to build.
401(k) & IRA Calculator: See how your primary retirement accounts will grow during your working years.
Investment Calculator: Model the growth of any lump sum investment over time.

Frequently Asked Questions (FAQ)

What is an annuity?

An annuity is a contract between you and an insurance company in which you make a lump-sum payment or series of payments and, in return, receive regular disbursements, beginning either immediately or at some point in the future. This calculator models the payout from a simple "annuity certain," where payments last for a fixed number of years.

Why is a conservative rate of return important during retirement?

During your working years, you have time to recover from market downturns. In retirement, a large market drop can be devastating because you are simultaneously withdrawing money, a phenomenon known as "sequence of returns risk." Therefore, most retirees shift to a more conservative portfolio (with more bonds and fewer stocks) to preserve capital, resulting in a lower expected rate of return.

Does this payout keep up with inflation?

No, this calculator determines a fixed, nominal monthly payment. The same dollar amount will be paid out each month for the entire period. This means that the purchasing power of your payout will decline over time due to inflation. Some more complex commercial annuities offer inflation-protection riders for an additional cost.