Immediate Annuity Calculator

The immediate annuity calculator estimates how much regular income a lump-sum premium can support when withdrawals begin right away. Enter the amount to invest, withdrawal term, expected annual return, final balance target, payment frequency, and payment timing. The result is the periodic withdrawal amount, total withdrawn, investment return, number of withdrawals, final balance target, and periodic return rate.

This page is intentionally narrower than a commercial annuity quote. It models a fixed-period drawdown of a premium. It does not price lifetime income, joint-life options, mortality credits, refund periods, inflation riders, or insurer-specific expenses. That distinction matters because a single premium immediate annuity from an insurance company is a contract; this calculator is a transparent time-value-of-money model. Informational, not financial advice.

How the calculator works

The calculation starts by converting the withdrawal term into periods. Ten years with monthly payments becomes 120 withdrawals. The annual rate is divided by the payment frequency, so a 1.5% annual return with monthly payments becomes 0.125% per month. The calculator then solves for the payment that makes the present value of all withdrawals plus the discounted final balance equal the premium.

If withdrawals are taken at the end of each period, the ordinary annuity formula is used directly. If withdrawals are taken at the beginning of each period, the ordinary payment is divided by one plus the periodic rate. That produces a slightly smaller payment because the account loses cash earlier and therefore has less money compounding during the term.

Use this page with the annuity calculator for a broader annuity view, the present value calculator to discount a future amount, and the future value calculator to compare the accumulation side of the same premium. For level-payment annuity factors, the present value annuity calculator is the closest sibling.

Formula used

The calculator defines the periodic rate and number of withdrawals first:

$r = \frac{\text{annual return}}{\text{payments per year}}$

$n = \text{years} \times \text{payments per year}$

For end-of-period withdrawals, it solves:

$\text{ordinary payment} = \left(PV - \frac{FV}{(1+r)^n}\right) \times \frac{r}{1-(1+r)^{-n}}$

For beginning-of-period withdrawals, it adjusts the payment:

$\text{beginning payment} = \frac{\text{ordinary payment}}{1+r}$

When the periodic return is zero, the calculator uses:

$\text{payment} = \frac{PV-FV}{n}$

Here PV is the premium, FV is the target final balance, r is the periodic return rate, and n is the rounded number of withdrawals.

Worked example matching the default calculator

The default inputs are a $100,000 premium, 10 years, 1.5% annual return, $0 target final balance, monthly withdrawals, and beginning timing. The calculator rounds the period count to:

$10 \times 12 = 120$

The monthly periodic return is:

$1.5\% \div 12 = 0.125\%$

The ordinary end-of-month payment is first computed from the annuity present value formula. Because the default timing is beginning of month, that ordinary payment is divided by 1.00125. The displayed withdrawal is $896.79 per month. Over 120 withdrawals, the total withdrawn is $107,615.28. With a zero final balance target, the total investment return displayed by the calculator is $7,615.28.

When to use it

Use this calculator when you want a quick, auditable income estimate from a lump sum. It can help compare a 10-year bridge income plan, a settlement payout, a fixed education fund, or a retirement account segment reserved for early retirement years. The result is especially helpful when you want to test tradeoffs: a higher final balance target lowers the withdrawal, a longer term lowers the withdrawal, and a higher return assumption raises the withdrawal.

The tool is also useful for reverse-checking quotes or planning conversations. If an insurer, advisor, or spreadsheet shows a payment, you can compare the broad shape of the math. Differences are not automatically errors; they may reflect life-contingent pricing, expenses, guarantees, or tax features that this calculator does not model.

Caveats before relying on the result

Inflation is the biggest practical caveat. A fixed monthly withdrawal may buy less over time even if the nominal schedule is accurate. Taxes can also change the spendable amount, especially if withdrawals come from a qualified retirement account or if annuity exclusion-ratio rules apply. Fees, surrender charges, and rider costs may reduce actual contract payouts.

The return assumption is another limitation. The calculator compounds at a constant rate for every period. A real investment account can earn uneven returns, and withdrawals during market declines can increase sequence-of-returns risk. If you need income for life rather than a fixed number of years, evaluate longevity risk directly instead of treating the final year as certain.

Sources

• SEC Investor.gov, Annuities — overview of annuity products, risks, and investor considerations.