Annuity Payout Calculator
Given a starting balance, an interest rate, and a payout period — how much can you withdraw each month before the balance hits zero?
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What an annuity does
A fixed annuity converts a lump sum (the "principal") into a stream of equal payments. The formula picks the payment amount that, with interest credited each period on the remaining balance, drains exactly to zero by the end of the term. The same math underpins mortgage payments — it's just running in the other direction.
Why immediate annuities pay more than a savings account
The payment amount is bigger than just interest because you're spending principal too. At 5% on $500k, interest alone is ~$25k/year (~$2,083/month). The annuity formula at 5% over 25 years pays about $2,920/month — the extra $837 is principal drawdown. After 25 years, you've spent the entire $500k plus all earned interest.
Inflation isn't included
A fixed annuity pays the same dollar amount every month for the full term. With 3% inflation, the purchasing power of that payment in year 25 is roughly half of what it is in year 1. Inflation-adjusted (real) annuities exist but pay a lower starting rate.