Annuity Calculator
How much will your annuity pay — and how much do you need to fund it? Calculate monthly payouts from a lump sum, grow savings with regular contributions, or compare ordinary vs annuity due.
Try a scenario
How to Use This Calculator
Tab "Payout"
Enter your lump sum (present value), the annual interest rate the fund will earn, and the payout period in years. The calculator shows the monthly payment an ordinary annuity would deliver — the amount you can withdraw each month until the fund reaches zero.
Tab "Accumulation"
Enter your monthly contribution, the expected annual return, and the number of years you will contribute. The result is the future value at the end of the accumulation phase — how large your nest egg will be if you save consistently at that rate.
Tab "Annuity Due vs Ordinary"
Enter the same lump sum, rate, and term used in the Payout tab. The calculator shows both the ordinary annuity (payments at end of period) and the annuity due (payments at beginning of period) side by side, and highlights the monthly and total payout difference between the two.
The Formulas
PMT = PV × r / [1 − (1 + r)^−n]
where PV = present value (lump sum), r = periodic rate (annual ÷ 12), n = total periods
Future value of ordinary annuity (accumulation):
FV = PMT × [(1 + r)^n − 1] / r
where PMT = regular contribution, r = periodic rate, n = total periods
Annuity due payment:
PMT_due = PMT_ordinary × (1 + r)
Annuity due pays slightly more because each payment is received one period earlier
Total paid out (any annuity):
Total = PMT × n
All calculations use standard time-value-of-money mathematics. No country-specific tax rates or insurance loadings are applied. Results are pre-tax estimates.
Worked Examples
Example 1 — Payout: $500,000 at 5% for 25 years (ordinary annuity)
A retiree has $500,000 in a fund earning 5% per year. They want to know how much they can withdraw each month for exactly 25 years before the fund reaches zero.
Calculation: PMT = 500,000 × 0.004167 / [1 − (1.004167)^−300] = $2,922.95/month. Over 25 years the retiree draws $876,885 total — $376,885 more than the original $500,000, funded by the ongoing 5% return.
Example 2 — Accumulation: Save $1,000/month at 7% for 30 years
An investor contributes $1,000/month into a retirement account earning 7% per year, compounded monthly, for 30 years.
Calculation: FV = 1,000 × [(1.005833)^360 − 1] / 0.005833 = $1,219,971. The investor turns $360,000 of contributions into over $1.2M — more than 70% of the final balance is pure compound growth.
Example 3 — Ordinary vs Due: $500K at 5% over 25 years
Comparing ordinary annuity (end-of-period payments) and annuity due (beginning-of-period payments) on the same $500,000 fund.
| Type | Monthly payment | Difference | Total paid out |
|---|---|---|---|
| Ordinary annuity | $2,922.95 | — | $876,885 |
| Annuity due ★ | $2,935.13 | +$12.18/mo | $880,539 |
The annuity due pays $12.18 more per month and $3,654 more in total. The difference arises because each payment is received one period earlier, so the fund earns slightly less interest — meaning a larger share goes to the payee. Annuity due is more favourable for the recipient; ordinary annuity is more common in insurance and pension products.
Understanding Annuities: Key Concepts
What Is an Annuity?
An annuity is a series of equal payments made at regular intervals. In finance, annuities appear in two contexts: payout annuities (a lump sum converted into a stream of payments — common in retirement) and savings annuities (regular contributions that accumulate into a lump sum — common in pension savings plans and investments).
Ordinary Annuity vs Annuity Due
An ordinary annuity (also called annuity-immediate) makes payments at the end of each period. This is the default for most consumer products: mortgage payments due at month-end, bond coupon payments, and insurance policy payments. An annuity due makes payments at the beginning of each period — common in rent, lease agreements, and some insurance products. Because annuity due payments arrive one period sooner, they are worth slightly more to the recipient.
Time Value of Money
All annuity maths rests on the principle that a dollar today is worth more than a dollar tomorrow — because today's dollar can earn interest. The present value formula discounts future payments back to today's value, while the future value formula compounds today's money forward. The annuity payment formula is simply the intersection of these two ideas: what fixed payment, discounted at rate r over n periods, equals PV?
Perpetuity: A Special Case
When the payout period is infinite (n → ∞), the annuity becomes a perpetuity: PMT = PV × r. A $500,000 fund at 5% supports a perpetual monthly payment of 500,000 × (0.05/12) = $2,083/month forever — because you only spend the interest, never the principal. Increase the term (25, 30, 40 years) and the monthly payout rises as you draw down principal too.
The Role of Interest Rate
The interest rate in an annuity payout calculation is the rate the fund continues to earn while paying out. If the fund earns more than assumed, payments last longer than planned; if it earns less, the fund runs dry early. For safe withdrawal planning, many advisers use a conservative rate (2–4%) well below the expected market return to build in a buffer.
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