Annuity Payout Calculator

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 in the first few years of it. Even when the average return over the whole period is identical, a bad sequence (crash first, recovery later) is far worse than a good one, because the early withdrawals sell down a shrunken portfolio and those shares are never there for the recovery. This is why many retirees hold one to two years of expenses in cash as a buffer.

This matters for reading the number above. Both formulas assume the same return every single month, which no portfolio has ever delivered. A steady 6% and a real-world sequence averaging 6% produce very different outcomes from the same starting balance. Treat the result as the arithmetic of a smooth path, not a forecast, and give yourself margin.

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.