Annuity Payout Calculator
Quick Reference
Payout Options
Life Only
Highest payout, ends at death
Period Certain
Guaranteed payments for set years
Joint & Survivor
Continues for surviving spouse
Related Calculators
Understanding Annuity Payouts
How Annuity Payouts Work
An annuity payout converts your accumulated savings into a stream of regular income payments. The amount you receive depends on your principal, the interest rate, and how long you want payments to last.
Example: $500,000 at 5% for 25 Years
- Monthly Payment: $2,922
- Total Received: $876,660
- Interest Earned: $376,660
Factors Affecting Payouts
Principal Amount
Larger savings = larger payments. Each additional $100K adds roughly $580/month at 5% over 20 years.
Interest Rate
Higher rates mean higher payments. A 1% rate increase can add $200+/month on $500K.
Payout Duration
Longer periods = smaller payments. 30-year payout is ~25% less per month than 20-year.
The 4% Rule
A common retirement guideline suggests withdrawing 4% of your portfolio annually, adjusted for inflation each year. This aims to make savings last 30+ years.
| Portfolio Size | 4% Annual | Monthly Income |
|---|---|---|
| $250,000 | $10,000 | $833 |
| $500,000 | $20,000 | $1,667 |
| $1,000,000 | $40,000 | $3,333 |
| $2,000,000 | $80,000 | $6,667 |
Payout Strategies
Fixed Period
Choose a specific number of years for payments. Provides certainty but may outlive your money or leave excess behind.
Lifetime Income
Insurance company guarantees payments for life. Removes longevity risk but typically costs more and has less flexibility.
Tax Considerations
Annuity payouts may be partially or fully taxable depending on the account type (traditional IRA, Roth IRA, non-qualified). Consult a tax professional to understand your specific situation.
Frequently Asked Questions
What is the 4% rule for retirement withdrawals?
The 4% rule is a guideline suggesting you can withdraw 4% of your retirement portfolio in the first year, then adjust that amount for inflation each year. This strategy aims to make your savings last 30 years. For example, with $1 million saved, you'd withdraw $40,000 the first year. However, this rule has limitations and may need adjustment based on market conditions and personal circumstances.
How long will my retirement savings last?
How long your savings last depends on your withdrawal rate, investment returns, and inflation. At a 4% withdrawal rate with 5% returns and 3% inflation, a portfolio might last 30+ years. Higher withdrawal rates or lower returns shorten this. Use an annuity payout calculator to model different scenarios based on your specific savings amount and expected retirement length.
What payout option should I choose for my annuity?
The best payout option depends on your needs. Life-only payouts offer the highest monthly income but stop at death. Period-certain options guarantee payments for a set time regardless of when you die. Joint-and-survivor annuities continue payments to a spouse but offer lower initial payments. Consider your health, other income sources, and whether you need to provide for a surviving spouse.
Are annuity payouts taxable?
Taxation depends on how the annuity was funded. Payouts from annuities purchased with pre-tax money (like traditional IRAs or 401(k)s) are fully taxable as ordinary income. Non-qualified annuities (purchased with after-tax money) are partially taxable - only the earnings portion is taxed. Roth IRA annuities may be completely tax-free if qualified. Consult a tax professional for your specific situation.