How it works
This calculator finds the level payment that draws a balance down to zero over a fixed period while the remaining money keeps earning a steady return. It applies to a fixed-period annuity or a planned drawdown of retirement savings.
A higher return or a longer period lowers the share of each payment coming from your principal. Payments at the beginning of each period are slightly smaller, because each one has one less period to grow.
Lifetime annuities sold by insurers are priced on life expectancy and interest rates, so actual quotes may differ. Use this as a benchmark when comparing offers.
Formula
Payment = PV × r ÷ (1 − (1 + r)^−n) [÷ (1 + r) for payments at the beginning]
Questions people ask
What is the difference between a fixed-period and a lifetime annuity?
A fixed-period annuity pays for a set number of years, then stops. A lifetime annuity pays as long as you live, so the insurer takes on the risk that you outlive your savings.
How does this compare with the 4% rule?
The 4% rule aims to preserve savings for at least 30 years with inflation-adjusted withdrawals. This calculator spends the balance to zero with level payments, so it typically shows a higher starting payment.
Are annuity payments taxable?
Payments from pre-tax accounts are fully taxable. For annuities bought with after-tax money, part of each payment is a tax-free return of principal.