Annuitization Payout Calculator
Turn a lump sum into guaranteed monthly income for a fixed period — see the monthly payout, total paid and interest earned.
How it works
Monthly payment = premium × i ÷ (1 − (1 + i)^−N), where i = annual rate ÷ 12 and N = years × 12
Annuitization converts a lump sum into a stream of equal payments, exhausting the principal plus interest over a set term (a period-certain annuity). The insurer credits interest on the declining balance, so a higher assumed rate raises the payment. Unlike a lifetime annuity, a period-certain payout stops when the term ends, which makes it useful for bridging a fixed number of years — but it carries no guarantee against outliving the money beyond that term.
Worked example
A $250,000 premium paid out over 20 years (240 months) at 4% gives a monthly payment of 250,000 × (0.04/12) ÷ (1 − (1 + 0.04/12)^−240) ≈ $1,515, or about $363,600 total — roughly $113,600 of it interest.
Frequently asked questions
What is annuitization?
It is the process of converting an accumulated lump sum into a series of periodic payments. A period-certain annuitization spreads the money over a fixed number of years; a life annuitization pays for as long as you live.
How is this different from a lifetime annuity?
This calculator models a period-certain payout that runs for the term you set and then stops. A lifetime annuity instead pays until death and is priced using mortality tables, so its payment reflects life expectancy rather than a fixed number of years.
What rate should I use?
Use the rate your annuity or insurer credits, which is typically tied to prevailing interest rates. Higher rates produce larger payments because more interest is earned on the balance as it is drawn down.
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Educational estimate using simplified assumptions — not tax, legal or financial advice. Verify limits and rules with the IRS or a qualified advisor.