Turn a lump sum into a stream of guaranteed monthly income and see how much you collect over the life of the annuity.
How an Income Annuity Works
An immediate annuity converts a single lump-sum premium into a series of guaranteed payments. The insurer pays you a fixed amount each month and, in a fixed-period annuity, those payments continue for a set number of years. Because the balance keeps earning interest while it is paid down, the total you collect exceeds the amount you put in.
The Payout Formula
A fixed-period annuity payment uses the standard amortization formula: PMT = PV × r ÷ (1 − (1 + r)^−n), where PV is your premium, r is the monthly interest rate, and n is the number of monthly payments. It is the same math that determines a loan payment — except here the insurer is repaying you.
Period-Certain vs Lifetime Annuities
This calculator models a period-certain annuity that pays for a fixed number of years. A lifetime annuity instead pays as long as you live, with the payment amount based on actuarial life expectancy. Lifetime options protect against outliving your money but stop when you pass away unless you add a guarantee rider.
Tip: The longer the payout period, the lower each monthly payment — but the more total interest the balance earns. Quotes from real insurers vary, so use this as an estimate and always compare actual offers.
Frequently Asked Questions
What is an immediate annuity?
An immediate annuity is a contract where you pay a lump sum to an insurer and begin receiving regular income payments right away, typically monthly. It is often used to create predictable retirement income from savings.
How is the monthly annuity payment calculated?
It uses the amortization formula PMT = PV × r ÷ (1 − (1 + r)^−n), where PV is the premium, r is the monthly rate, and n is the total number of payments. The remaining balance keeps earning interest until it is fully paid out.
Why is the total payout more than my premium?
Because the money you have not yet been paid continues to earn interest during the payout period. That interest is added to the payments, so the total you collect is greater than your original lump sum.
What is the difference between a period-certain and a lifetime annuity?
A period-certain annuity pays for a fixed number of years. A lifetime annuity pays for as long as you live, regardless of how long that is, with payment size based on life expectancy. This calculator models the period-certain type.
Are annuity payments guaranteed?
Payments are backed by the financial strength of the issuing insurance company, not the federal government. State guaranty associations provide limited backup coverage. Always check the insurer's credit rating before buying.