Annuity Payout Calculator
Calculate how long your savings will last with regular withdrawals, or how much you can withdraw monthly from a retirement nest egg.
What Is an Annuity Payout?
An annuity payout is a series of regular withdrawals from a savings account or investment portfolio. The key question in retirement planning is: given a nest egg and an investment return, how much can I withdraw each month without running out of money?
The Two Core Formulas
Formula 1 — How much can I withdraw for N years?
PMT = PV × r / [1 − (1+r)^(−n)]
Formula 2 — How long will my money last at a given withdrawal?
n = −log(1 − PV × r / PMT) / log(1 + r)
Where:
- PV = Current portfolio balance (present value)
- PMT = Monthly withdrawal amount
- r = Monthly return rate (annual rate ÷ 12)
- n = Number of months
The 4% Safe Withdrawal Rate Rule
In 1994, financial planner William Bengen analyzed historical market data and found that retirees could safely withdraw 4% of their portfolio in year one, then adjust for inflation each year, with a high probability of their portfolio lasting 30 years. This became known as the 4% Rule (also called the Safe Withdrawal Rate, or SWR).
Example: A $1,000,000 nest egg × 4% = $40,000 per year = $3,333/month.
More recent research suggests 3.0%–3.5% may be safer given lower expected bond returns. Some planners use 5% for shorter retirements (under 20 years).
Sequence of Returns Risk
One of the biggest risks in retirement is a market crash early in retirement. Even if the average return is the same, a bad sequence (crash first, then recovery) is far worse than a good sequence (recovery first, then crash). This is why many retirees hold 1–2 years of expenses in cash as a buffer.
Fixed vs. Variable Annuities
A fixed annuity guarantees a set payment regardless of market performance (purchased from an insurance company). A variable annuity invests in the market, so payouts fluctuate. This calculator models a variable/investment account scenario.
Inflation Adjustment
This calculator uses a nominal (not inflation-adjusted) rate. To account for inflation, subtract the expected inflation rate from your expected return. For example, if you expect 7% returns and 3% inflation, use 4% as your real return rate.