How to use the Annuity Payout Calculator
- Enter the balance available at the start of payout.
- Enter the return you expect during the payout phase — typically lower than accumulation, as allocations get more conservative.
- Enter how many years the income must last.
- Compare the amortising payout against the interest-only figure to judge how much principal you are consuming.
How the calculation works
The amortising payout drains the balance to zero exactly at the end of the term, which maximises income but leaves nothing behind and nothing for longevity beyond the term. The interest-only figure preserves the principal indefinitely but pays substantially less.
Return assumptions during drawdown matter more than during accumulation because of sequence-of-returns risk: a bad first five years while withdrawing can permanently impair the portfolio in a way that the same returns during accumulation would not.
The classic 4% rule sits between these two outputs. On a $500,000 balance it implies about $1,667 a month with inflation increases, which is lower than the amortising figure here precisely because it is designed to survive poor market sequences.
Payout = B × r ÷ [1 − (1 + r)⁻ⁿ]; interest-only = B × annual rate ÷ 12Source: Bengen, 'Determining Withdrawal Rates Using Historical Data', Journal of Financial Planning (1994).
Worked example
$500,000 at 4.5% paid out over 25 years.
- Monthly rate 0.375% over 300 payments.
- Amortising payout is about $2,779 a month.
- Interest-only would be $1,875 a month.
About $2,779 a month, totalling roughly $834,000, with the balance fully consumed at year 25.
Frequently asked questions
What if I live longer than the term?+
The balance is exhausted. A lifetime annuity or a longer term protects against that at the cost of lower monthly income.
Is the 4% rule still valid?+
It remains a reasonable starting point; recent research suggests 3.3–4% depending on allocation, fees and horizon.
Should payouts rise with inflation?+
Ideally yes. A level payout loses roughly a third of its purchasing power over 20 years at 2% inflation.
Last reviewed September 1, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.