Annuity Payout Calculator

Why the payment is more than the pot divided by years

If you simply split a pot evenly across the years, you ignore the interest the remaining balance keeps earning while it is paid down. A level annuity payment accounts for that: the money still invested keeps working, so the sustainable payment is higher than a naïve division suggests. The gap between the two is exactly the interest column above.

Early payments are mostly interest, later ones mostly principal

Like a mortgage in reverse, the first payments draw heavily on interest earned by a large balance, while later payments return principal as the balance shrinks. The split shown here is for the whole term; the year-by-year mix shifts steadily from interest toward principal.

Fixed term versus lifetime income

This page models a fixed term that empties the pot at the end. A real lifetime annuity from an insurer instead pays until death, pooling longevity risk across many buyers — which is why a genuine life annuity can pay more than a fixed-term drawdown of the same pot for someone who lives long, and less for someone who dies early. The "draw for life" figure here is a rough fixed-term proxy over roughly thirty years, not an insurer quote.

Inflation quietly halves a level payment

A payment that stays level in dollars loses purchasing power every year. At 3% inflation, a fixed payment is worth about half as much after 24 years — so a level income that looks comfortable at the start can feel tight by the end of a long retirement. Insurers sell inflation-adjusted annuities that rise each year, but they start lower for the same pot. This calculator shows nominal dollars; mentally discount later years, or plan for a rising need.

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