Estimate the payout amount for a fixed payout length, or the length a fund can last at a fixed payment amount. For the accumulation phase that builds the balance up, use the Annuity Calculator.
An annuity lives in three acts: accumulation, the one-way door of annuitization, and payout. This calculator works the third act, and it works it in both directions. Fix Length asks: given the balance, the return, and a chosen number of years, what payment exactly empties the fund on schedule? Fix Payment asks the mirror question: given the payment you want, how long before the fund is gone? The two questions share one engine — the balance earns the periodic rate, then pays — run forward until it hits zero or the term ends.
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One technical choice shapes every figure on this page: the rate per period is the effective rate, (1 + annual rate)1/f − 1, so a 6% year paid monthly is 0.4868% a month — not the 0.5% you would get by simply dividing. Twelve effective months compound back to exactly 6%; twelve nominal halves overshoot to 6.17%, and would pay $5,551.03 instead of $5,511.20 on the defaults. The balance chart tells the second story: early payments are mostly interest (year 1 earns $28,200.44 while the balance falls by only $37,933.98), late payments are mostly principal, and the interest line flattens as the balance it feeds on shrinks.
Fixed length and fixed payment fail in opposite directions, and choosing between them means choosing which failure you fear. Stretch a fixed length too long and the payment may be too small to live on; pick one too short and the income stops while you are still very much alive — though with period-certain payouts, at least any balance left at death passes to your heirs. Fix the payment too high and the same outliving risk returns in disguise; fix it too low and you may die with a large balance unspent. There is also a floor worth knowing: a payment that does not exceed the interest never touches principal at all. On the defaults that threshold is $2,433.78 a month — at or below it, the $500,000 lasts literally forever.
Real contracts offer more than the two fixed options above. A life-only payout pays until death, sized by life expectancy — die early and the remaining value stays with the insurer; outlive the table and you come out ahead. Joint and survivor extends the payments over two lives for a smaller amount, and life with period certain bolts a guaranteed minimum term onto a life payout for a designated beneficiary. At the other extreme, a lump sum withdraws everything at once — no penalty after 59½, but the whole earnings portion lands in one tax year, which is rarely the tax-smart move. Every one of these choices, once annuitized, is irrevocable, which is precisely why the arithmetic above deserves a careful hour before the signature.
A qualified annuity sits inside a tax-advantaged plan — an IRA, 401(k), 403(b), SEP or similar — and was bought with pre-tax money: contributions may have lowered taxable income going in, and every dollar paid out is taxed as ordinary income. A non-qualified annuity is bought with after-tax dollars, so only its earnings are taxed, and it carries no required minimum distributions and no contribution limit. Annuity-specific features, such as a guaranteed death benefit that pays beneficiaries regardless of market falls, can ride along inside either wrapper.
Earnings are never taxed while they accumulate — only when money comes out. For a non-qualified contract bought after August 13, 1982, withdrawals are taxed earnings-first (LIFO): every withdrawal is fully taxable income until the earnings are exhausted and only principal remains. Anything taken before age 59½ generally adds a 10% IRS early-withdrawal penalty on the earnings. Contracts soften this with free-withdrawal provisions (a slice of the value each year without surrender charges) and hardship exceptions — disability, terminal illness, major medical emergencies, and in some contracts long-term care — but the default assumption should be that annuity money is locked until retirement age.
A stale contract is not a life sentence. Under Internal Revenue Code §1035, an annuity can be exchanged for another annuity (or one with long-term care benefits) tax-free, and life insurance or endowment contracts can be exchanged into annuities as well — though never the reverse. Partial exchanges are allowed too, with the basis split pro-rata: half of a $50,000 contract with a $40,000 basis becomes a second contract worth $25,000 with a $20,000 basis, which turns a later $10,000 withdrawal from fully taxable into only $5,000 taxable. The catch: take no distributions from either contract for 180 days after a partial exchange, or the IRS may unwind the treatment. The owner, insured and annuitant must be the same people on both contracts, and despite the tax code allowing partial exchanges, not every insurer offers them.
Yes, modestly. More frequent payments drain the balance sooner, so less interest accrues: on the defaults the 10-year total is $679,339.79 paid annually, $664,568.51 quarterly, $661,344.16 monthly and $660,479.63 biweekly — the same principal leaving by different doors.
A fixed-length (period certain) payout is not life-contingent: if the annuitant dies before the term ends, the remaining payments or balance pass to their beneficiaries or heirs. That is the structural difference from a life-only payout, where the insurer keeps what is left.
Disclaimer: This calculator provides estimates for educational purposes only and does not constitute financial or tax advice. Annuity contracts vary; guarantees depend on the issuing insurer's claims-paying ability.