Annuity Payment Calculator
Find the level payment a lump sum can pay out over a set time, or the regular deposit needed to reach a savings goal.
The level payment from a lump sum is the balance times the rate per period, divided by 1 minus (1 + rate) to the power of minus the number of payments. A $500,000 balance earning 5% a year, paid out monthly for 25 years, gives $2,922.95 a month, $876,885.06 in all. Paid at the start of each month, it is $2,910.82.
This calculator shows the arithmetic of level annuity payments for general education; it is not financial advice, nor investment, insurance or tax advice, and it is not a quote or a recommendation to buy any annuity. It assumes a fixed rate for the whole term, compounded at the payment frequency, and leaves out fees, surrender charges, taxes, inflation and the lifetime guarantees insurance annuities carry. Actual payments from an insurance company or plan will differ; consult a qualified financial professional before making decisions.
Payment you receive, monthly
$2,922.95
- Number of payments
- 300
- Total you receive
- $876,885.06
- Interest earned while paying out
- $376,885.06
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About the Annuity Payment Calculator
An annuity is a run of equal payments at regular intervals, and the payment depends on four things: the amount, the interest rate, the number of payments and when in each period they fall. In payout mode the balance is paid out to you, not repaid to a lender, and it earns interest while it is drawn down to zero, so the payments add up to more than the starting sum. A $500,000 balance at 5% a year, paid monthly for 25 years, pays $2,922.95 a month; over 300 payments that is $876,885.06, of which $376,885.06 is interest the balance earned along the way. Payments at the start of each period, an annuity due, are slightly smaller, $2,910.82 here, because each one comes out a period sooner, so the balance has one less period to earn interest. In savings mode the question runs the other way: what regular deposit grows to a goal? Reaching $1,000,000 in 30 years at 7%, deposited monthly, takes $819.69 a month, $295,088.98 in deposits, with the rest from growth. The rate is treated as a nominal annual rate compounded at the payment frequency, so 5% a year, paid monthly, is 5/12 percent a month.
Frequently asked questions
How is an annuity payment calculated?+
For a payout, the payment is PV x i / (1 - (1 + i) to the power -n), where PV is the balance, i the rate per period and n the number of payments. $100,000 at 4% paid yearly for 10 years gives $12,329.09 a year.
What is the difference between an ordinary annuity and an annuity due?+
An ordinary annuity pays at the end of each period; an annuity due pays at the start. The annuity due payment is the ordinary payment divided by (1 + i), so it is a little smaller: $2,910.82 a month instead of $2,922.95 on $500,000 at 5% over 25 years.
How much do I need to save each month to reach a goal?+
Switch to savings mode. The deposit is FV x i / ((1 + i) to the power n - 1). To reach $1,000,000 in 30 years at 7%, deposits of $819.69 at the end of each month would reach $1,000,000 at a steady 7%.
Is this what an insurance company annuity will pay me?+
Not exactly. An insurer's quote depends on its own rates, fees, your age and any lifetime or survivor guarantees. This calculator shows the payment a balance supports at the rate and term you enter, which shows the arithmetic behind a quote.
Annuity present and future value, annuity due, and solving for the payment: OpenStax, Principles of Finance 2e, 8.2 Annuities and 8.3 Loan Amortization.
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