Calculate how much you can withdraw from an annuity each period, or how long your balance will last at a given withdrawal amount.
Living off the interest and drawing the balance down to zero are two different plans with two very different paychecks. On $500,000 at 5%, interest alone pays $25,000 a year, or $2,083.33 a month, and leaves the principal untouched forever. Spread the same balance to zero over 20 years and the level payment is $3,299.78 a month, about 58% more, so the interest-only plan leaves $1,216.45 a month ($291,947 over the 20 years) unspent. This calculator does the full drawdown arithmetic and shows the balance falling year by year.
Typical case: $500,000 earning 5% a year, paid out monthly for 20 years. With i = 0.05 ÷ 12 and N = 20 × 12 = 240 payments, payment = PV × i ÷ (1 − (1 + i)^−N) = $3,299.78. Across 240 payments you receive $791,946.89, of which $291,946.89 is interest earned along the way. Payments are assumed to arrive at the end of each period, which is an ordinary annuity.
Frequency changes the check but not the idea. The same balance paid quarterly gives $9,923.26 each time ($39,693.05 a year), and paid once a year gives $40,121.29, because later payments leave the money invested longer. Duration mode flips the problem: periods = −ln(1 − PV × i ÷ payment) ÷ ln(1 + i), rounded up. At $2,800 a month the same pot lasts 328 months, or 27.3 years.
Edge cases. A payment of $2,000 a month is less than the first month's interest of $2,083.33, so the logarithm's argument goes negative and the page stops with a message that the payment is too small to ever deplete the balance. A payment equal to the interest triggers the same guard. At a 0% rate the formula collapses to balance ÷ payment: $500,000 ÷ $2,800 = 178.57, rounded up to 179 payments, or 14.9 years. One quirk: Total Paid Out counts the final payment at full size, so that 0% case reads $501,200 even though only $500,000 exists.
No. This is a fixed-term drawdown at an assumed rate and it ends when the money does. An insurer's life annuity is priced on mortality, so it can pay for as long as you live, and its payout rates differ. Use this page for order-of-magnitude checks, not to compare quotes.
The payout is only as good as the rate. At 3% instead of 5%, the same 20-year schedule pays $2,772.99 a month, which is $526.79 less. At 4% it pays $3,029.90.
Because the unspent balance keeps earning. Dividing $500,000 by $2,800 suggests about 14.9 years, but at 5% interest the money lasts 27.3 years.
No, they are level in nominal dollars. At 2% inflation, a $3,299.78 payment in year 20 buys about 67% of what it did in year one.
The page assumes the end of the period. An annuity-due payment would be smaller by a factor of 1 + i, roughly 0.4% on a monthly schedule at 5%.