Annuity Payout Calculator
The quote, your age, and what you would do with the money instead
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Long-range scenario, not a guarantee. Small changes in returns, inflation, fees, taxes, and withdrawal timing can materially change the result.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the premium — the lump sum you would hand the insurer — and your age when the income starts.
- 02
Enter the monthly income you were quoted per $100,000. The field opens on an illustrative April 2026 figure; replace it with a real quote, and get three, because the spread between carriers is routinely 5-10%.
- 03
Set the period certain you would add, if any. A 10-year certain guarantees payments to your heirs even if you die first, and typically costs only 3-5% of the payment.
- 04
Under Advanced options, set the Table V expected-return multiple for your age — 20.0 at 65 — which is what turns the premium into a tax-free share of every payment.
- 05
Enter the return you would earn keeping the money invested instead, and read the break-even: the age at which drawing the same income from the portfolio would have run it out.
Formula
Monthly income = (premium ÷ 100,000) × the monthly quote per $100,000. Payout rate = annual income ÷ premium. Expected return = annual income × the IRS Table V multiple for your age. Exclusion ratio = investment in the contract ÷ expected return, and the tax-free part of each payment is the income times that ratio — the premium cancels out, so the ratio is the same at any premium. Basis runs out after exactly the multiple in years. The break-even against self-drawdown is the month a balance growing at your return and paying out the same income reaches zero.
Example
$250,000 at 65, quoted at $625 a month per $100,000, pays $1,562.50 a month — $18,750 a year, a 7.50% payout rate. A 10-year period certain costs 3% of the payment, $46.88 a month, and guarantees $181,875 to you or your heirs. Expected return is $18,750 × 20.0 = $375,000, so the exclusion ratio is 66.7%: $12,500 tax-free and $6,250 taxable each year, or $1,375 of tax at 22% — until the basis runs out at 85 and the whole payment becomes taxable. Keeping the money invested at 5% and drawing the same income instead runs it out at about age 87, and the annuity pays $729 a month more than a 4% withdrawal on the same pot.
Definitions
- SPIA
- Single-premium immediate annuity — one lump sum handed to an insurer, income starting within a year and continuing for life. No accumulation phase and no cash value.
- Payout rate
- Annual income divided by premium. Not a yield: each payment is part interest, part return of your own principal, and part mortality credit.
- Exclusion ratio
- Investment in the contract divided by expected return — the share of every payment that comes back tax-free, until the basis is fully recovered.
Good to know
A payout rate is not a yield, and the difference is the whole product
An immediate annuity is quoted as dollars of monthly income per dollar of premium. Divide the annual income by the premium and you get a payout rate — 7.50% on the $250,000 at 65 priced above. It looks exactly like a yield and it is nothing of the kind. Every payment mixes three ingredients: interest the insurer earned on your money, your own principal handed back to you, and a mortality credit — money released from the pool by annuitants who died earlier than expected. A 7.5% bond returns your principal at maturity. A 7.5% payout rate has already spent it paying you. That third ingredient, the mortality credit, is the only reason to buy one of these: it is the one source of return that a portfolio genuinely cannot manufacture, because no individual investor can pool their longevity with anyone else's. On the figures here it is worth $729 a month over what a 4% withdrawal on the same money would pay, and what you hand over for it is liquidity, the estate, and any chance to change your mind.
The exclusion ratio, and the year it stops
Buy an annuity with money that has already been taxed and part of every payment is simply your own principal coming back, which is not income and is not taxed again. The mechanics are IRC 72(b) and Publication 939's General Rule: divide investment in the contract by expected return, and that share of each payment is excluded. Expected return is the annual payment multiplied by a life expectancy multiple from IRS Table V — 20.0 at 65, 16.0 at 70, 12.5 at 75. On $250,000 buying $18,750 a year, expected return is $375,000 and the ratio is 66.7%, so $12,500 a year is tax-free and $6,250 is not. Two things about that ratio are worth carrying away. It is independent of the premium — double the premium and the income and the tax-free share double in lockstep — and it stops. Once the excluded amounts add up to what you paid, which happens after exactly the number of years in the multiple, every dollar of every later payment is fully taxable: at 65 with a multiple of 20, that is age 85, and the tax on the same check jumps from $1,375 to $4,125 at a 22% rate. Nobody plans for that year, and a great many 85-year-olds discover it by opening a 1099-R. A qualified annuity, bought inside an IRA or a 401(k), has no basis and therefore no exclusion ratio at all — the whole payment is ordinary income from day one.
The comparison that actually matters
The honest test of an annuity is not against doing nothing; it is against keeping the same money invested and drawing the same income. Run $250,000 at 5% while paying out $1,562.50 a month and it empties at about age 87. That is the break-even, and it reframes the entire decision. Live past 87 and the annuity keeps paying while the portfolio would have been gone. Die before it and everything left in the portfolio would still have been yours to leave behind. So the question is not which produces more money — it is whether you would rather be exposed to living a very long time or to dying with money on the table. There are only two variables that move that break-even meaningfully: how long you actually live, which nobody knows, and what the portfolio earns, which is the assumption most likely to be too generous. The break-even is worth re-running at 3% as well as 5%, because a bad decade early in retirement does to a drawdown exactly what it cannot do to an insured payment.
Level payments, one insurer, and a quote that changes weekly
Three practical constraints belong on the same page as the payout figure. First, the payment never rises. At 2.5% inflation the $1,562.50 a month that looks generous at 65 buys what $843 buys today by age 90 — which is why an annuity works far better as a floor under essential spending than as the whole plan. Inflation-adjusted SPIAs exist; the starting payment is roughly a quarter to a third lower, which is the same trade priced up front. Second, the income is a promise from one company, not a deposit. There is no federal guarantee behind it. The backstop is your state's guaranty association, which typically covers around $250,000 of present value in annuity benefits per person per company and varies by state, so splitting a large premium across two or three highly rated carriers costs almost nothing and keeps the whole promise inside the covered band. Third, the quote itself is a moving target. SPIA pricing tracks long interest rates and reprices continuously, quotes differ between carriers by 5-10% on the same premium and the same form, retail non-qualified contracts are priced gender-distinct while contracts inside a qualified plan are unisex, and several states levy a premium tax of up to about 3.5% before the income is even set. Which is why the payout field on this page is an editable one carrying an illustrative dated figure, and why the only number worth acting on is one you were quoted this week.
Frequently asked questions
How much does a $250,000 annuity pay per month?
On an illustrative April 2026 quote of $625 a month per $100,000 for a 65-year-old, $1,562.50 a month — $18,750 a year, a 7.50% payout rate. At 70 the same premium buys about $1,875 a month and at 75 about $2,300, because the insurer expects to pay for fewer years. Those are market quotes that move with long interest rates, not published figures, and a female buyer's retail quote runs roughly 5-6% lower because non-qualified contracts are priced gender-distinct.
Is a 7.5% payout rate the same as a 7.5% return?
No, and this is the single most important thing on the page. A payout rate is annual income divided by premium. Every payment mixes three things — interest the insurer earned, your own principal handed back, and a mortality credit funded by annuitants in the pool who die early — so a 7.5% payout rate and a 7.5% bond are entirely different trades. The bond returns your principal at the end; the annuity has already spent it paying you.
How much of each payment is taxable?
On non-qualified money, only the part above the exclusion ratio: investment in the contract divided by expected return. Here $250,000 over an expected return of $375,000 is 66.7%, so $12,500 of the $18,750 comes back tax-free and $6,250 is taxable — $1,375 of tax at 22%. Inside an IRA there is no basis at all, so the whole $18,750 is ordinary income and the tax is $4,125.
Does the tax-free part last forever?
No. Once the excluded amounts add up to what you paid — after exactly the number of years in the expected-return multiple, so 20 years here, at age 85 — every dollar of every later payment is fully taxable. That is IRC 72(b)(2), and it applies to any annuity starting after 1986. Running the other way, if you die with basis unrecovered, the unrecovered amount is an itemized deduction on your final return.
Is an annuity better than just drawing down the portfolio?
It depends entirely on how long you live, which is the point. Keeping $250,000 invested at 5% and drawing the same $1,562.50 a month runs the money out at about age 87. Live past that and the annuity is ahead and keeps paying; die before it and the remainder would still have been yours. You are not buying a return, you are buying insurance against outliving the money, and the premium is everything you would have left behind.
What happens if the insurer fails?
There is no federal guarantee. The backstop is your state's guaranty association, which typically covers around $250,000 of present value in annuity benefits per person per company and varies by state. Splitting a large premium across two or three highly rated carriers costs almost nothing and keeps the whole promise inside the covered band. Check each carrier's financial strength rating first, because that is the risk you are actually taking.