Annuity Payout Calculator
An annuity converts a lump sum into a stream of level periodic payments. This calculator uses the capital recovery formula from financial mathematics to find the payment that fully draws down a principal over a fixed number of periods at a chosen periodic interest rate. It is the same equation that determines a fixed loan payment, viewed from the payee side. Enter the principal, the interest rate per period, and the number of payments to see the level payout, the total of all payments, and the interest portion. The model assumes an ordinary annuity with payments at the end of each period and excludes insurer fees and taxes.
Annuity payout formula
i = rate per period / 100
If i = 0: payment = principal / n
Else: payment = principal * i / (1 - (1 + i)^-n)
Total paid = payment * n
Total interest = total paid - principal
This is the capital recovery factor applied to the principal. The total interest is the excess of all payments over the original principal, which is the return the annuity earns while it is being drawn down.
Worked example
A $500,000 principal at 0.5 percent per month over 240 monthly payments gives payment = 500,000 * 0.005 / (1 - 1.005^-240) = $3,582.16 per month. Total paid out is 3,582.16 * 240 = $859,717.27, of which $359,717.27 is interest.
Annuity payout: frequently asked questions
What does an annuity payout calculator compute?
It computes the level periodic payment that exhausts a principal sum over a fixed number of payments at a given periodic interest rate. This is the standard amortization (capital recovery) formula, the same mathematics used to find a loan payment. It assumes payments are made at the end of each period (an ordinary annuity).
What is the annuity payout formula?
Payment = P times i divided by (1 minus (1 plus i) to the power minus n), where P is the principal, i is the interest rate per period, and n is the number of payments. When the interest rate is zero, the payment is simply P divided by n.
How do I convert an annual rate to a periodic rate?
Divide the annual nominal rate by the number of payments per year. For a 6 percent annual rate paid monthly, the periodic rate is 6 divided by 12, which is 0.5 percent per month. Enter the periodic rate and the total number of periods that match your payment frequency.
Does this include taxes or fees?
No. The result is the gross periodic payout implied by the principal, rate, and term. Real annuity products may include insurer fees, mortality credits, surrender charges, and taxes that change the net amount you receive. Treat this as the financial-mathematics baseline.
Official sources
- U.S. Securities and Exchange Commission: Annuities (Investor.gov).
- U.S. Consumer Financial Protection Bureau: consumerfinance.gov.
Reviewed by the CalculatorHub team, edited by James Graham, 19 June 2026. See our methodology.