- What is the annuity payout formula?
- PMT = PV × i × (1 + i)^n ÷ ((1 + i)^n − 1). PV is the balance you start with, i is the rate per period (annual rate ÷ periods per year) and n is the number of periods (years × periods per year). For $500,000 at 5% over 20 years paid monthly, i = 0.0041667 and n = 240, which gives $3,299.78 a month. If payments come at the start of each period, divide by (1 + i). If the rate is 0, it collapses to plain division: $500,000 ÷ 240 = $2,083.33.
- How long will my money actually last?
- That's the How long it lasts mode, and the answer is rarely a round number. $500,000 at 5% paying $3,000 a month lasts 23 years and 9 months — 285 full payments, then a final $427.00. Drop the payment to $2,500 and the same pot stretches to 35 years and 10 months. This calculator names that last partial payment instead of rounding the term up, because rounding up quietly tells you the money lasts longer than it does.
- What if the payment is smaller than the interest?
- Then the balance never runs out, and any calculator showing you a number there is wrong. $500,000 at 5% earns $2,083.33 in the first month, so a $2,000 monthly payment doesn't even spend the interest — the balance grows instead of draining. Rather than printing Infinity or a negative term, this tool says so and tells you what the payment has to clear. The threshold is balance × rate per period, and it shifts slightly if you're paid at the start of the period.
- What's the difference between an ordinary annuity and an annuity due?
- It's the timing of each payment. An ordinary annuity (End of period) pays after the period's interest is credited; an annuity due (Start of period) pays first, so the money leaves before it can earn. Start of period always pays a little less from the same pot: $500,000 at 5% over 20 years gives $3,299.78 a month at the end of each month and $3,286.09 at the start. Going the other way, funding $3,000 a month for 20 years needs $454,575.94 with end-of-month payments and $456,470.01 with start-of-month ones.
- How much do I need saved to pay myself a set amount?
- That's the Balance needed mode — the present value of the payments you want. $3,000 a month for 20 years at 5% needs $454,575.94 today. Stretch the same payment to 30 years and it needs $558,844.85. Notice the 50% longer term costs only about 23% more, because the balance keeps earning while it drains. Without any return at all, the same 20 years would need the full $720,000, and the gap between those two numbers is what the interest is doing for you.
- How do I do this in Excel or Google Sheets?
- Use =PMT(rate, nper, pv, fv, type) for the payment, =NPER(rate, pmt, pv, fv, type) for the term, and =PV(rate, nper, pmt, fv, type) for the balance needed. The rate is per period, and money you put in is negative, which is the part everyone gets wrong. For the default example, =PMT(5%/12, 240, -500000, 0, 0) returns 3299.78 and =NPER(5%/12, 3000, -500000, 0, 0) returns 285.142081. This calculator writes the formula for your numbers, signs included, so you can paste it straight in.
- Does the rate matter more than the amount?
- Over a long drawdown, it matters a lot. The same $500,000 over 20 years pays $2,772.99 a month at 3%, $3,299.78 at 5% and $3,876.49 at 7% — the 7% plan hands you about 40% more each month than the 3% one from an identical pot. That's also why it's worth running the number with a rate below what you expect. If you want the answer in today's dollars, enter your return minus inflation: 5% growth against 3% inflation is a 2% real rate, which pays $2,529.42 a month.
- Is this the same as buying an annuity from an insurance company?
- No, and the difference matters. This is the math — what a balance you control can pay out at a given return. An insurance annuity is a contract where you hand over the money and a carrier guarantees the income, priced off your age, your state and their rate tables, usually with surrender charges attached. Their quote will differ from this number because you're also buying a guarantee. Use this to know what your own money can do before anyone quotes you, and note that taxes, fees and inflation aren't in here.
- Why does the drawdown table show interest and balance separately?
- Because the interest is most of the story. Paying yourself $3,299.78 a month from $500,000 over 20 years hands you $791,946.89 in total — $291,946.89 of that is interest the balance earned while it was draining, not money you started with. The table shows the balance at the end of each year so you can see how slowly it moves early on and how fast it falls at the end. The last row lands on exactly $0.00, which is what a 20-year term means.
