Work out the income an annuity pays out, for a fixed term or for life.
When you annuitize, the accumulated value becomes a stream of level payments. The payment formula is the same as a loan amortization in reverse: the issuer 'lends' you a lump sum (your premium) and you receive periodic payments that gradually return both principal and interest. The key variables are the starting balance, the credited rate, and the duration — for a lifetime payout, duration is approximated by your life expectancy.
Periodic annuity payment
Payment = Balance × rate / (1 − (1 + rate)^−periods)
Lifetime payout estimates use life expectancy, not guaranteed durations. Actual annuity quotes from insurers depend on your age, gender, health and prevailing interest rates.
A fixed-period annuity pays for a guaranteed number of years, after which payments stop regardless of whether you're alive. A lifetime annuity pays as long as you live — the insurer bears the longevity risk, which is why their payouts use actuarial rates that account for expected survival. This calculator approximates lifetime payout by using your life expectancy as the fixed period.
Because the remaining balance continues earning interest throughout the payout phase. Each payment has two components: return of principal and interest on the outstanding balance. The total interest earned can be significant over a 20–30 year payout.
Actual quotes from insurers (called 'annuity payout rates' or 'annuity income factors') depend on current interest rates, your age, and whether payments are single or joint life. For context, a common rule of thumb is $500–$700 monthly per $100,000 for a 65-year-old in a typical rate environment.
Monthly payments give you the most flexibility for budgeting and produce a very similar total as quarterly. The marginal difference is small. Choose the frequency that matches your expense pattern.