RETIREMENT

Annuity Calculator

An annuity turns money into a stream of regular payments. This calculator works both ways: from a lump sum to the monthly payment it can pay you, and from a monthly saving to the lump sum it can build. Enter your numbers below and press Calculate to see, in plain figures, how the two sides of an annuity add up.

How to use this annuity calculator

1. Choose the calculation type at the top. Pick “Lump sum to monthly payments” if you have a pot of money and want to know the income it can pay you. Pick “Monthly payments to lump sum” if you are paying in a set amount each month and want to know what it builds up to.
2. Enter the lump sum or the monthly payment, depending on the type you chose. Use a figure from an annuity quote, a pension statement, or the amount you can realistically set aside each month.
3. Enter the annual interest rate. For a fixed annuity, this is the rate in the quote or contract. If you are only exploring, a cautious figure in the 4% to 6% range shows how the numbers behave.
4. Enter the number of years: how long the payments will run in the first mode, or how long you will keep paying in in the second mode.
5. Press Calculate. For a lump sum you will see the monthly payment, the total paid out over the term, and the total interest earned. For monthly payments you will see the future value, the total contributed, and the total interest earned.

A worked example

Say you hand over a lump sum of $250,000 and the annuity pays out over 20 years at an annual interest rate of 6%.

The monthly payment comes to $1,791.08. Over the 240 payments the total paid out is $429,858.64. Of that, $250,000 is your own money coming back to you and $179,858.64 is interest earned along the way. The fund runs down to zero at the end of the 20 years, by design.

The calculator also works in the other direction. Pay in $500 a month for 15 years at the same 6% rate and the future value builds to $145,409.36. Your total contributed is $90,000, so interest adds $55,409.36 on top of what you paid in. Seeing both directions side by side makes it easier to compare an annuity quote with simply saving the money yourself.

The Consumer Financial Protection Bureau offers free guides on retirement income and financial planning.

Related calculators

• Retirement Calculator: check whether your savings are on track to fund the monthly spending you want in retirement.
• Investment Calculator: project what a starting amount plus regular monthly investing could grow to over time.
• Social Security Calculator: estimate your monthly benefit at 62, 67 and 70 before you plan other retirement income.
• Net Worth Calculator: add up everything you own and everything you owe to get one clear figure.

How this annuity calculator works

An annuity is a contract, usually with an insurance company, that converts money into scheduled payments. You might pay in a single lump sum, pay in over time, or both, and in return the provider promises a payment on a regular schedule.

In the payout phase, each payment is part interest and part return of your own money. That is why, in this term-certain model, the fund runs down to zero by design at the end of the term: the last payment spends what is left, including the final interest.

Real annuities add fees, options such as lifetime income and survivor benefits, and tax rules, which this simple interest model does not include. Use the result as a clear starting point for comparison, not as a quote for an actual product.

Practical tips

• Compare the internal rate an annuity offers with safe alternatives, because fees and caps can make it lower than it looks.
• Lifetime annuities trade the lump sum for income that cannot be outlived, which is insurance, not an investment return.
• Check the insurer's financial strength rating before buying, because the promise can last decades.
• Get the tax treatment explained in writing, since annuity payments are often partly taxable.

Frequently asked questions

What is an annuity?

A contract, usually with an insurer, that turns a lump sum or a series of payments into regular income, often for retirement.

What is the difference between a fixed and a variable annuity?

A fixed annuity pays a set rate or payment; a variable annuity invests in funds, so payments and value rise and fall with the market, usually with higher fees.

What happens to the money if I die early?

It depends on the contract: a term-certain annuity keeps paying your beneficiaries for the term, a life-only annuity may stop at death, and many contracts offer refund or survivor options at a cost.

Are annuity payments taxed?

Generally the growth portion is taxed as income when paid out, while the part that is your own money coming back is not; rules differ for annuities inside retirement accounts.