Annuity Payout Calculator

About the Annuity Payout Calculator

An annuity payout calculator answers the most pressing question in retirement: how long will my money last? Enter your starting balance, expected investment return, and desired monthly withdrawal, and the calculator tells you exactly how many years your savings will sustain that income — or if your withdrawal is low enough, that your balance will never deplete. This depletion analysis is essential for anyone drawing down a portfolio in retirement, modeling the sustainability of a fixed withdrawal strategy, or evaluating whether a self-managed withdrawal plan is safer than purchasing a guaranteed annuity. Many retirees underestimate longevity risk — the very real possibility of outliving their savings. Our calculator uses the standard annuity depletion formula, accounting for both the growth your portfolio earns each month and the regular withdrawals made. It shows the exact month and year your balance reaches zero, the total amount withdrawn over the period, and how changing any variable affects the outcome. The analysis also shows the maximum sustainable monthly withdrawal — the perpetuity amount where your monthly interest income equals your withdrawal, meaning the balance never depletes.

How It Works

The depletion formula is derived from the present value of annuity equation solved for n: Months to Depletion = -ln(1 - PV x r / PMT) / ln(1 + r), where PV is the starting balance, r is the monthly interest rate (annual rate / 12), and PMT is the monthly withdrawal. If PMT is less than PV x r (your monthly withdrawal is less than your monthly interest), the balance never depletes — a perpetuity. Example: $500,000 balance, 5% annual return, $2,500/month withdrawal. Monthly r = 0.05/12 = 0.004167. PMT = $2,500. Monthly interest = $500,000 x 0.004167 = $2,083. Since PMT > monthly interest, balance eventually depletes. n = -ln(1 - 500,000 x 0.004167 / 2,500) / ln(1.004167) = -ln(1 - 0.8333) / 0.004158 = -ln(0.1667) / 0.004158 = 1.7918 / 0.004158 = 430 months = 35.8 years. Max sustainable payout: $2,083/month keeps balance forever; $2,500/month depletes in 35.8 years; $3,000/month depletes in 24.4 years. Small withdrawal changes have large timeline impacts near the sustainability boundary.

Tips & Best Practices

• ✓The 4% safe withdrawal rate — withdrawing 4% of your initial portfolio value annually, adjusted for inflation — is based on historical US stock and bond market data and has sustained 30-year retirements with high probability, but is not guaranteed.
• ✓Sequence of returns risk: poor investment returns in the first 3-5 years of retirement are far more damaging than the same average return experienced in a different order. A 30% market drop in year 2 of retirement can permanently impair a portfolio that would have survived the same drop in year 15.
• ✓The maximum sustainable monthly payout — Balance x (annual rate / 12) — is your break-even floor. Withdrawing more than this indefinitely will eventually deplete the balance. Withdrawing less means the balance grows over time.
• ✓Healthcare cost inflation (historically 5-6% per year) is the largest wildcard in retirement withdrawal planning. Model your withdrawal increasing by 3-5% annually to stress-test your depletion timeline against real expense growth.
• ✓Social Security as longevity insurance: claiming at 70 maximizes your guaranteed income floor, which reduces the pressure on your portfolio. With a higher guaranteed income floor, you can withdraw less from savings and extend depletion timelines dramatically.
• ✓Bucket strategy: keeping 2-3 years of withdrawals in cash or short-term bonds provides a liquidity buffer that prevents forced selling during market downturns, effectively improving your actual withdrawal sustainability versus a simple static model.
• ✓Consider purchasing a deferred income annuity (DIA or longevity annuity) at age 70 to begin paying at 85 — the relatively low cost of this catastrophic longevity coverage lets you draw down your portfolio more aggressively for the first 15 years of retirement.

Who Uses This Calculator

Retirees evaluating whether their savings can sustain their desired monthly withdrawal throughout retirement. Pre-retirees determining what portfolio size they need to fund their target income at a given return rate. People comparing self-managed withdrawal against purchasing a guaranteed annuity or delaying Social Security. Financial planners stress-testing retirement income plans under different return scenarios. Investors deciding how aggressively to invest in retirement based on their portfolio depletion timeline.