Turn a lump sum into a steady stream of income
💡 Why This Matters Whether you're evaluating an insurance annuity product or just planning how a lump sum could fund a fixed period of income, knowing your monthly payout number up front helps you compare options and set realistic expectations before committing to anything.
The word "annuity" comes from the Latin annus, meaning "year" — the same root as "annual." Annuities date back to the Roman Empire, where citizens could pay a lump sum in exchange for guaranteed annual payments, a structure that's barely changed in 2,000 years.
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This calculator uses the present-value-of-annuity formula, solved for the payment amount: it takes your lump sum, your payout period, and your expected annual return, then calculates the fixed monthly payment that would fully deplete the balance by the end of the period — accounting for continued growth on the remaining balance along the way.
The main figure is your monthly payment — what you'd receive each month for the full payout period. The breakdown shows your total payout over the entire period and how much of that came from investment growth versus your original lump sum, which shows how much the return rate is doing for you beyond just returning your own money.
This models a fixed nominal payment that doesn't adjust for inflation — a dollar received in year 20 buys less than a dollar received today. It also assumes a constant rate of return throughout the entire payout period, which real markets don't provide, and doesn't include any fees, taxes, or riders that a commercial annuity product would carry.
Try adjusting the payout period to see the tradeoff between a higher monthly payment (shorter period) and a longer-lasting income stream (longer period). If you're evaluating a real annuity product, compare its quoted payment against this calculator's result — a meaningfully lower quote usually means fees or guarantees are built into the price.
Example: Say you have a $500,000 lump sum, want it to pay out over 20 years, and expect a 5% annual return. This projects to a monthly payment of about $3,300 — a total payout of $791,947 over the full period, of which $291,947 comes from investment growth on the remaining balance.
This calculator models a fixed-period payout — equal payments over a set number of years, with the balance reaching zero at the end. A retirement withdrawal calculator typically models flexible or percentage-based withdrawals from a balance that may or may not fully deplete.
No — this calculator shows a fixed nominal payment amount that doesn't adjust for inflation over time. In real purchasing-power terms, a fixed payment buys less each year as prices rise, so consider that when planning around a long payout period.
With a 0% return, the calculator simply divides your lump sum evenly across the number of months — no growth or interest included, just your principal spread over time.
This models the underlying math of a straightforward fixed-period payout, but real annuity products sold by insurance companies often include fees, guarantees, riders, and surrender charges that this calculator doesn't account for. Use this for planning and comparison, not as a substitute for reviewing an actual product's terms.