Annuity Payout Calculator

Once the accumulation phase of an annuity ends, the contract enters its payout (or distribution) phase, where the insurer begins sending money back to you on a regular schedule. This calculator looks at that phase in two ways. Use the Fixed Length tab to find out how large each payment can be if you want the balance to run out after a chosen number of years. Use the Fixed Payment tab to see roughly how long a balance will last if you withdraw the same amount every period.

Both views assume the remaining balance keeps earning the rate of return you enter, and that payments are taken at the end of each period. Real-world results will differ if your actual rate of return changes over time.

The Fixed Length calculation uses the standard present-value-of-annuity relationship shown below. It treats your starting balance as a sum that must be drawn down to zero in equal instalments while the remaining funds continue earning interest.

The Fixed Payment calculation runs the same relationship in reverse: starting from a chosen payment amount, the tool steps through the balance one period at a time, subtracting the payment and crediting interest on what remains until the balance reaches zero. If a chosen payment is smaller than the interest the balance earns in a single period, the balance never shrinks — the calculator flags this, since the payout would effectively continue indefinitely.

An annuity can move through up to three stages. During the accumulation phase, money is added — either as a single lump sum or as a series of contributions — and the contract's value grows, often on a tax-deferred basis. Annuitization is the pivotal, usually irrevocable event where the insurer stops accepting contributions and converts the accumulated value into a future stream of payments.

The payout (or distribution) phase that follows is what this calculator models. Some contracts, known as immediate annuities, skip accumulation almost entirely and move straight from a single deposit into payout. Deferred annuities, by contrast, may spend years or decades accumulating value before annuitization occurs.

How your payments are taxed depends heavily on how the annuity was funded. A qualified annuity sits inside a tax-advantaged retirement account such as an IRA or 401(k) and was funded with pre-tax dollars, so essentially every dollar received during payout counts as ordinary income, and required minimum distribution rules will eventually apply.

A non-qualified annuity is funded with after-tax money outside a retirement plan. Only the earnings portion of each payment is taxable; the portion representing a return of your original contribution comes back tax-free. For most non-qualified contracts, the tax code treats withdrawals as coming from earnings first, so payments are fully taxable until the account's growth has been used up, after which the remaining payments are a tax-free return of principal.

This calculator focuses on the two structures below, but insurers offer several alternatives worth knowing about:

Annuities are designed as long-term retirement vehicles, and taking money out early carries costs. Withdrawals before age 59½ generally trigger a 10% federal early-withdrawal penalty on the taxable portion, on top of ordinary income tax. Many contracts also impose their own surrender charges for withdrawals taken within the first several years of the policy.

Most insurers allow a limited "free withdrawal" amount each year — often around 10% of the account value — without a surrender charge, and penalty-free early access is sometimes available for situations such as a qualifying disability, a terminal illness diagnosis, or certain long-term care needs.