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Annuity Calculator

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Enter a lump sum, interest rate, and payout period to find the periodic payment it would generate.

Annuity Calculator

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Payment per period
$659.96
Total paid out
$158,389.38
Total interest earned
$58,389.38
Assumes a fixed rate for the full payout period - real annuity products may have fees, variable rates, or other terms that change the actual payment.

The formula

Periodic rate = Annual rate / Payments per year Payment = Lump sum x Periodic rate / (1 - (1 + Periodic rate)^-Number of periods)
Example

$100,000 at 5% annual interest, paid out monthly over 20 years (240 payments): payment ≈ $659.96/month, totaling $158,389.38 - meaning $58,389.38 comes from interest earned along the way.

Step-by-step guide

  1. Enter your lump sum - the amount being converted into a payment stream.
  2. Enter the annual interest rate the balance earns while it pays out.
  3. Enter the payout period and how often payments arrive.

Why the payment is higher than simply dividing the lump sum evenly

Dividing $100,000 over 240 monthly payments naively gives $416.67/month - but this calculator's result is meaningfully higher, because the remaining balance keeps earning interest throughout the payout period, and that ongoing interest is exactly what allows the payment to be larger than a simple even split. This is the same core mathematical idea behind mortgage payments, just running in reverse: instead of paying down a loan balance over time, an annuity draws down a lump sum while it continues earning a return, with the formula calibrated so the balance reaches exactly zero at the final payment.

Common mistakes

Assuming the payment is simply the lump sum divided by the number of payments - that ignores the interest the remaining balance continues to earn throughout the payout period.
Ignoring fees, surrender charges, or variable-rate terms that many real annuity products carry - this calculator models a simple fixed-rate scenario, not any specific commercial product.

Frequently asked questions

What's the difference between this and a mortgage payment?

They use the same underlying formula, just framed in reverse - a mortgage calculates the payment needed to pay off a loan balance, while an annuity calculates the payment a lump sum can sustain while it earns interest. Mathematically, they're mirror images of each other.

Does this account for taxes?

No - this shows the gross payment before any taxes that may apply depending on the type of account or product and your local tax rules.

Is this the same as what an insurance company would quote me?

Not necessarily - real commercial annuity products often include fees, guarantees, mortality credits, or variable terms that shift the actual payment away from this simplified fixed-rate model. Use this as a general estimate, and compare against an actual quote for a real decision.

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