Annuity Calculator (Payout, Present Value & Lump Sum Comparison)

Free annuity calculator: estimate the periodic payout from a lump sum, the lump sum needed for a target payout, and compare a lump sum offer against annuity payments.

What is an annuity calculator?

An annuity is an insurance product: you hand over a lump sum today, and in exchange the insurer pays you a fixed amount at regular intervals for a set number of years (or for life). This calculator focuses on term-certain annuities — payments that continue for a fixed number of years no matter what — and answers three practical questions: how much would a given lump sum pay out per period, how large a lump sum is needed to reach a target payout, and whether a lump sum offer or a stream of annuity payments is worth more today.

It intentionally sits apart from money.wealth.savings, which models building up a balance through regular contributions, and money.wealth.retirement, which models drawing down a portfolio over an unknown lifespan. This tool is for a narrower, very common decision: you already have (or have been offered) a lump sum, or a defined stream of payments, and need to know which is worth more — the kind of choice that comes up with pension buyouts, lottery jackpots, and structured settlements.

How to use the annuity calculator

Choose a calculation mode Pick "Payout amount", "Required lump sum", or "Lump sum vs. annuity" depending on the question you want answered.
Enter the relevant amounts Depending on the mode, enter the lump sum you would deposit, the payment you want to receive, or the lump sum offer you are comparing.
Enter the assumed rate and term Enter the rate the insurer is crediting (or the return you expect from investing it yourself) and the number of years the payments should run.
Pick a payment frequency Switch between monthly, quarterly, and annual payments to see how the per-period amount changes.

Tips for getting more out of it

This calculator models a term-certain annuity, not a life annuity. When comparing against a quote from an insurance company, check whether their quote is for a fixed term or for life — the numbers are not directly comparable.
Switching between monthly, quarterly, and annual payments changes the per-period payment amount even at the same annual rate and term, because more frequent compounding slightly reduces each individual payment.
The break-even rate in "Lump sum vs. annuity" mode is a purely mathematical crossover point. In practice, also weigh differences in tax treatment and your own ability to avoid spending a large lump sum too quickly.
Real annuity products sold by insurers often include sales loads, guarantee riders, or inflation-adjustment options that this calculator does not model — always review the product disclosure before signing a contract.

When this calculator is useful

Deciding between a pension lump sum and monthly payments

Use the "Lump sum vs. annuity" mode to see, at the return you realistically expect, which option is worth more in present-value terms.

Weighing a lottery jackpot's cash option against the annuity

Compare the upfront cash payout against decades of annuity payments using a concrete break-even discount rate instead of a gut feeling.

Considering a single-premium immediate annuity

Use the "Payout amount" mode to estimate what a given deposit would pay out per month or per year.

Working backward from a target retirement income

Use the "Required lump sum" mode to see how much you would need to deposit today to reach a specific monthly or annual payment goal.

Glossary

Annuity: An insurance contract where a lump sum or series of premiums is exchanged for a stream of regular payments over a fixed term or for life.
Term-certain annuity: An annuity that pays out for a fixed number of years regardless of whether the recipient is still alive. This calculator assumes this type.
Life annuity: An annuity that keeps paying for as long as the recipient lives, priced using life-expectancy tables. This calculator does not model life annuities, since the math depends on mortality assumptions the insurer sets.
Present value: The value today of a payment (or series of payments) to be received in the future, after discounting it back at an assumed interest rate. A higher discount rate makes future money worth less today.
Break-even discount rate: The specific discount rate at which a lump sum and a stream of annuity payments have exactly the same present value — a useful benchmark against your own expected investment return.
Immediate annuity: An annuity where payments begin shortly after the lump sum is deposited (typically within a month to a year), as opposed to a deferred annuity that starts paying out years later.

Frequently asked questions

A savings account holds your money as your own asset, available to withdraw at any time. An annuity transfers the money to an insurance company in exchange for a guaranteed stream of payments; once annuitized, you generally cannot get the lump sum back on demand.

There is no universal answer, but a useful rule of thumb is: take the lump sum if you are confident you can consistently earn more than the break-even rate by investing it yourself, and take the annuity payments if you are not, or if you are worried about spending a large lump sum too quickly. Tax treatment can also differ by payout method, so it is worth consulting a financial or tax professional for large amounts.

A common rule of thumb is 3-5% for a conservative, bond-heavy assumption, or 6-8% for a long-term stock-heavy portfolio, though neither is guaranteed. Try both a conservative and an optimistic rate to see how sensitive the result is.

No. This calculator assumes a term-certain annuity that pays for a fixed number of years regardless of survival. A true life annuity requires actuarial assumptions that vary by insurer, so get an official quote from the insurance company or a financial planner for that product.

Side Note — Where the annuity got its name

The word "annuity" comes from the Latin annus, meaning "year" — the original sense was simply a yearly payment. The idea is often traced back to ancient Rome, where contracts called "annua" let a buyer pay a lump sum up front in exchange for a fixed annual payment for life or for a set term. The Roman jurist Ulpian is credited with producing one of the earliest known actuarial tables, estimating the value of these annual payments by the age of the recipient — a strikingly early example of pricing risk by life expectancy.

The modern annuity market took shape in 17th and 18th century Europe, when governments issued "tontines" and life annuities to raise money for wars. Britain famously sold life annuities at the same price regardless of the buyer's age or health, which meant young, healthy buyers got an unusually good deal — a classic case of adverse selection. That costly lesson pushed insurers toward the age- and health-based pricing that underpins modern actuarial science.

Today, annuities show up far beyond retirement planning: lottery organizations use them to structure jackpot payouts (offering winners a choice between an immediate cash sum and decades of annual payments), and courts use "structured settlements" to convert lawsuit awards into long-term periodic payments. In every case, the underlying idea is the same one the Romans used nearly two thousand years ago — turning a lump sum into a right to be paid over time.

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