Do My NumbersRetirement income

Annuity payout calculator

Fair starting income$710a month for life

8.5% of the premium a year at 4.5% interest. A fair value under these assumptions, not a quote.

Annuity type
Yearly payments by ageExample numbers

Payments start at $8,522 a year. The expected payment, which allows for the chance that payments have stopped, falls away in later years. There is an even chance payments have stopped by about age 84.

Source: US SSA 2023 period life table; Do My Numbers calculations. Figures in nominal USD.
Fair income a year
$8,522$710 a month
Payout rate
8.5%Of the premium, first year
Annuity factor
11.73Premium per $1 a year of income
Payments repay the premium
Age 7775% chance you are alive then
Your life expectancy
Age 8318.1 more years

This is a fair value: the income $100,000 buys if it earns 4.5% a year and pays out in line with the SSA 2023 period life table, with nothing taken for costs. An insurer’s quote is a different number: it includes the provider’s expenses and profit margin, and uses its own interest rates and life tables. A payout rate of 8.5% is not an interest rate either; part of each payment is your own premium coming back.

Show the working for your numbers

  1. Value of 1 a year for life: you

    a¨x(m)=1m∑j≥0vj/m(1+e)⌊j/m⌋ j/mpx\ddot{a}^{(m)}_{x} = \frac{1}{m} \sum_{j \ge 0} v^{j/m} (1+e)^{\lfloor j/m \rfloor}\, {}_{j/m}p_{x}
    • Age xYour age today, in whole years.How it works: Life tables Age 65
    • Interest rate iThe interest rate per period, used to move money between dates.How it works: Present value Interest rate 4.50%
    • Escalation eThe yearly increase in annuity payments: 0 for a level annuity, or expected inflation for a CPI-linked one. Yearly increase 0.00%

    Monthly life annuityThe present value of 1 a year paid in 12 monthly instalments at the start of each month, for life. equals 11.7344

  2. Fair starting income a year

    P=Premiuma¨P = \frac{\text{Premium}}{\ddot{a}}
    • PremiumThe lump sum paid to buy the income. Premium $100,000
    • Total annuity factorThe value of 1 a year of starting income, allowing for every feature chosen: guarantee, reversion and increases. Annuity factor 11.7344

    Payment PThe amount of each payment.How it works: Annuity formulas equals $8,522

  3. Payout rate: first-year income as a share of the premium

    Payout rate=PPremium\text{Payout rate} = \frac{P}{\text{Premium}}
    • Payment PThe amount of each payment.How it works: Annuity formulas Income a year $8,522
    • PremiumThe lump sum paid to buy the income. Premium $100,000

    Payout rateThe first year’s income as a percentage of the premium. It is not an interest rate: part of each payment is your own money coming back. equals 8.52%

  4. Each monthly payment

    Pmonth=P12P_{\text{month}} = \frac{P}{12}

    Monthly paymentEach monthly payment: the yearly income divided by 12. equals $710

Updated October 30, 2026 · Free, no sign-up, nothing stored

Educational illustration, not financial advice.

Built and maintained by a former actuary with qualifications in finance and economics.

Methodology: formulas, data and limits

How this calculator works

This is one of our retirement income calculators. It has two modes, chosen with the switch above the results: the value of a life annuity, and the payments of an annuity-certain.

Life annuity values income paid for as long as you live. You enter your age, the premium (the lump sum that buys the income) and an interest rate. The calculator works out the present value of $1 a year of income paid for life, called the annuity factor, then divides the premium by it to get the fair starting income. Each future payment is discounted at the interest rate and weighted by the chance that someone is alive to receive it, from the US Social Security Administration’s 2023 period life table (Period Life Table, 2023, as used in the 2026 Trustees Report). Between birthdays it assumes deaths are spread evenly through the year. More on how life annuities are valued.

You can add a spouse and choose how much of the income continues to them after your death, a guarantee period during which payments continue even after death, level or CPI-linked payments, and monthly or yearly payments. For a couple the calculator assumes the two lifetimes are independent (see joint and last-survivor probabilities).

Annuity-certain covers payments for a fixed number of years, or forever (a perpetuity), with no mortality involved. It finds the payment a lump sum supports, the present value of a stream of payments, or the future value they build up to. Payments can come at the end of each period (an annuity-immediate) or at the start (an annuity-due), and can grow each year. The yearly interest rate is converted to the equivalent rate for each payment period, so twelve monthly rates compound back to exactly the yearly rate. The formulas are explained in annuity formulas and present value.

Worked example: payments from a lump sum

Take $200,000 earning 5% a year and paid out monthly over 20 years, each payment at the end of the month. The monthly rate equivalent to 5% a year is 0.4074%, and there are 240 payments. The present value of $1 a month for 240 months at that rate, the annuity factor ana_{\angl{n}}, is 152.9434. Dividing the lump sum by the factor gives a payment of $1,308 a month.

Over 20 years the payments add up to $313,842, of which $113,842 is interest earned on the money not yet paid out. If each payment came at the start of the month instead, it would be $1,302: a little less, because every payment arrives a month sooner. If the payments last forever, the same lump sum supports $815 a month from interest alone and is never used up.

The present value calculation runs the other way. At 5% a year, $1,308 a month for 20 years is worth $200,050 today.

Worked example: a life annuity’s fair income

Take a 65-year-old man with $100,000 to turn into monthly income for life, valued at 4.5% a year. The value of $1 a year paid monthly for his lifetime is 11.73, so $100,000 supports a fair income of $8,522 a year, or $710 a month. That is a payout rate of 8.5% of the premium in the first year.

A payout rate is not an interest rate. Part of each payment is his own premium coming back, and the payments stop when he dies. Under these assumptions his payments add up to the premium at about age 77, and there is a 75% chance he is alive then. His life expectancy is 18.1 more years, to about age 83, and there is an even chance the payments have stopped by about age 84.

Each extra feature lowers the starting income, because it adds to the payments the premium has to cover:

  • With a 63-year-old woman as joint annuitant and 100% of the income continuing to whoever lives longer, the fair income is $555 a month, a payout rate of 6.7%.
  • Payments rising 2.5% a year start at $569 a month and overtake the level income at age 74.
  • A 10-year guarantee period gives $670 a month.

The interest rate matters too. At 5.5% instead of 4.5%, the level income is $771 a month.

Fair value, not a quote

The life annuity mode gives a fair value: the income that uses up the premium exactly, on average, at your chosen interest rate, if the people receiving it live and die in line with the SSA population table, with nothing taken for costs. It is a benchmark for understanding annuity prices, not a price anyone offers.

An insurer’s quote is a different number. It includes the provider’s expenses, commission and profit margin, and the cost of the capital it must hold. Insurers also use their own interest rates, linked to the bonds they buy, and their own life tables. People who choose to buy life annuities often live longer than the population as a whole, and insurers’ tables allow for that.

The formulas

an=1−vni,v=11+ia_{\angl{n}} = \frac{1 - v^{n}}{i}, \quad v = \frac{1}{1 + i}

The present value of 1 paid at the end of each period for nn periods, at interest rate ii per period. A lump sum PVPV supports a level payment P=PV/anP = PV / a_{\angl{n}}. For payments at the start of each period, the factor is a¨n=(1+i) an\ddot{a}_{\angl{n}} = (1 + i)\, a_{\angl{n}}.

a¨x=∑k≥0vk(1+e)k kpx\ddot{a}_{x} = \sum_{k \ge 0} v^{k} (1+e)^{k}\, {}_{k}p_{x}

A life annuity paid yearly in advance to someone aged xx. Each payment is discounted by vkv^{k}, grows by the escalation ee, and is weighted by kpx{}_{k}p_{x}, the chance of being alive kk years from now. The fair income is P=Premium/a¨xP = \text{Premium} / \ddot{a}_{x}. Monthly payments use the same sum over twelve payments a year.

a¨=a¨x+ρ(a¨y−a¨xy)\ddot{a} = \ddot{a}_{x} + \rho\left(\ddot{a}_{y} - \ddot{a}_{xy}\right)

With a spouse aged yy, a share ρ\rho of the income continues after your death. The bracket is the value of income paid to your spouse while they are alive and you are not.

“Show the working” under the results applies these formulas to your own numbers, step by step.

What this leaves out

  • Taxes. How annuity income is taxed depends on whether the premium came from pre-tax savings, and on your other income.
  • Insurer expenses, commission and profit margins, which real quotes include.
  • The insurer’s credit risk. Life annuity payments depend on the insurer staying able to pay for decades.
  • Improvements in mortality after 2023. A period table uses one year’s death rates for every future age, so people alive today are likely to live a little longer than it shows, which makes a life annuity cost more to provide.
  • Selection and health. The table covers the whole US population; annuity buyers, and you, may differ.
  • Actual inflation. A level annuity loses buying power as prices rise, and the CPI-linked option here assumes one inflation rate for every year.
  • A single interest rate for every year, and the fact that most life annuities cannot be cashed in once bought.

Educational illustration, not financial advice.

Questions

How is an annuity payout calculated?

An annuity payout is the premium divided by an annuity factor, the present value of $1 a year of income. For a life annuity, that factor discounts each future payment at an interest rate and weights it by the chance someone is alive to receive it. Older buyers get a higher payout because fewer payments are expected. Adding a spouse, a guarantee period or yearly increases lowers the starting income.

What is the present value of an annuity?

The present value of an annuity is the lump sum that, invested at a given interest rate, would pay exactly the same stream of payments. Each payment is discounted back to today and the results are added up. A higher interest rate or fewer payments make it smaller. Payments at the start of each period (an annuity-due) make it larger than payments at the end.

What is the difference between an annuity-immediate and an annuity-due?

An annuity-immediate pays at the end of each period and an annuity-due pays at the start. Because each annuity-due payment arrives one period sooner, it is worth more. Its present value is the annuity-immediate value multiplied by one plus the interest rate per period. Loan repayments are usually an annuity-immediate; rent paid in advance is an annuity-due.

Why is an insurer's annuity quote different from a fair value?

An insurer's quote includes its expenses, commission, profit margin and the cost of the capital it must hold, which a fair value leaves out. Insurers also use their own interest rates and their own life tables for annuity buyers, who often live longer than the population as a whole. The fair value here is a benchmark at the interest rate you choose, not a price anyone offers.

How much does a $100,000 annuity pay per month?

It depends mainly on your age when payments start, the interest rate, and features such as income for a spouse, a guarantee period or yearly increases. Choose Life annuity above and enter the amount as the premium to see the fair monthly income under your assumptions. Quotes from insurers include their costs and use their own rates and tables, so they will differ.

Sources