Monthly Income from Savings
Last reviewed: April 2026
Calculate how much monthly income an annuity or lump sum can provide during retirement. Find the payout amount based on your balance, rate, and desired payout period. This calculator runs entirely in your browser — your data stays private, and no account is required.
Annuity payout calculations determine how much you receive periodically from your accumulated annuity value. The payout depends on four key factors: the account balance, the assumed interest rate during the payout phase, the payout frequency (monthly, quarterly, annually), and the payout duration (fixed period or lifetime). Life annuity payouts are lower per payment because the insurance company must account for the possibility of paying you for 30+ years, while a 10-year certain payout is higher because the total period is fixed.
Life-only annuities pay the highest monthly amount but stop when you die — nothing goes to heirs. Life with period certain (e.g., life with 10-year guarantee) pays slightly less but ensures at least 10 years of payments to you or your beneficiaries. Joint-and-survivor annuities cover two lives (typically spouses) at a reduced monthly rate. Lump-sum withdrawal forfeits the guaranteed income stream but gives you full control. The Pension vs Lump Sum Calculator helps evaluate the trade-off between guaranteed payments and a lump sum you invest yourself.
| Annuity Type | Monthly Payout (Age 65) | Lifetime Total (20 yr) | Inflation Protection |
|---|---|---|---|
| Life Only | $2,800–$3,200 | $672K–$768K | None |
| Life + 10-Year Certain | $2,600–$2,900 | $624K–$696K | None |
| Joint Life (50%) | $2,300–$2,600 | $552K–$624K | None |
| Fixed Period (20 yr) | $2,900–$3,100 | $696K–$744K | None |
| COLA-Adjusted (3%) | $2,100 rising | Varies | Yes |
An annuity converts a lump sum into a guaranteed income stream, either for a fixed period or for life. The payout amount depends on the principal invested, the insurance company's assumed interest rate, the payout period chosen, and the annuitant's age and gender (for life annuities). A 65-year-old investing $200,000 in an immediate fixed annuity might receive approximately $1,100–$1,300/month for life, though rates vary by insurer and market conditions. The guarantee comes from the insurance company's general account, backed by state guaranty associations (typically up to $250,000 per insurer per state).
| Payout Type | How It Works | Monthly Payment (est. on $200K) | Risk |
|---|---|---|---|
| Life only | Pays until death, nothing to heirs | $1,200–$1,350 | Lose value if you die early |
| Life with 10-yr certain | Pays for life, minimum 10 years to heirs | $1,100–$1,250 | Lower payment for guarantee |
| Joint life (100%) | Pays for both spouses' lifetimes | $950–$1,100 | Lowest payment |
| Period certain (20 yr) | Pays for exactly 20 years | $1,050–$1,150 | No longevity protection after period |
Fixed annuities provide a guaranteed interest rate and predictable payments — the simplest and most conservative option. Variable annuities invest in subaccounts (similar to mutual funds), so payments fluctuate with market performance — higher upside potential but more risk and typically higher fees (2–3% annually). Fixed indexed annuities credit interest based on a market index (like the S&P 500) with downside protection — you participate in a portion of market gains (via caps, spreads, or participation rates) while never losing principal to market declines. For income planning, compare annuity payouts against systematic withdrawal strategies using our Retirement Calculator.
Instead of annuitizing, you could invest $200,000 and withdraw 4% annually ($8,000/year or $667/month), adjusting for inflation. Historical data suggests a diversified portfolio supports this withdrawal rate for 30+ years with high probability. The annuity provides a higher initial payout ($1,200/month) with certainty but no inflation adjustment and no legacy value. The systematic withdrawal approach provides less initial income but preserves flexibility, potential growth, inflation protection, and a remaining balance for heirs. Many retirees use a hybrid approach: annuitize enough to cover essential expenses (housing, food, utilities) for guaranteed income, and keep the remainder invested for discretionary spending and growth. Model different withdrawal strategies with our Savings Goal Calculator.
Annuity taxation depends on how the annuity was funded. Annuities purchased with pre-tax dollars (inside a traditional IRA or 401(k)) are fully taxable as ordinary income — every dollar received is taxable. Annuities purchased with after-tax dollars (non-qualified) use an exclusion ratio: a portion of each payment is a tax-free return of principal and the remainder is taxable income. The exclusion ratio is calculated as your investment divided by the expected total payout over your life expectancy. After your original investment has been fully recovered, all subsequent payments become fully taxable. Understand how annuity income affects your overall tax picture with our Tax Bracket Calculator.
Annuities are most valuable for retirees who have already maximized Social Security, need guaranteed income beyond pension and Social Security to cover essential expenses, are worried about outliving their money, and want to reduce investment decision-making in retirement. Annuities are less appropriate for younger investors (long holding periods), people with serious health conditions (may not live long enough to benefit), those needing liquidity (surrender periods of 5–10 years), or investors comfortable managing a diversified withdrawal strategy. Surrender charges can trap your money: many annuities impose penalties of 5–8% for early withdrawal during the first 7–10 years. Always compare the guaranteed annuity income to what a well-managed portfolio could provide with our Compound Interest Calculator.
The biggest risk with fixed annuities is inflation erosion. A $1,200/month payment that covers your expenses comfortably at age 65 has the purchasing power of roughly $720/month by age 85 at 3% inflation. Over a 20-year retirement, your fixed payment loses approximately 40% of its real value. Some insurers offer inflation-adjusted annuities that increase payments by 2–3% annually, but the initial payment is significantly lower — often 25–35% less than a non-adjusted annuity. This trade-off requires careful analysis: if you expect a long retirement (family history of longevity, good health), the inflation adjustment becomes increasingly valuable. Model inflation's impact on your retirement income with our Inflation Calculator.
Your annuity is only as safe as the insurance company backing it. AM Best, S&P, Moody's, and Fitch rate insurance companies on their financial strength and claims-paying ability. Choose companies rated A+ or higher by AM Best, as lower-rated companies carry greater risk of default. State guaranty associations typically protect up to $250,000 per policy per insurer, but recovery from a failed insurer can take years. For large annuity purchases, consider splitting your money across multiple highly rated insurers to stay within guaranty association limits while diversifying counterparty risk. Evaluate how an annuity purchase fits into your overall portfolio with our Net Worth Calculator.
Understanding the different annuity types is essential for making informed retirement income decisions. Fixed annuities guarantee a set interest rate and predictable payments — currently offering 4-6% for multi-year guaranteed annuities (MYGAs), they provide stability but no inflation protection. Variable annuities invest in mutual fund sub-accounts, offering growth potential but exposing payments to market risk — annual fees of 2-3% (mortality and expense charges, administrative fees, sub-account management fees) significantly reduce returns. Fixed indexed annuities offer returns linked to a market index (like the S&P 500) with a floor protecting against losses — participation rates of 40-80% mean you capture only a portion of market gains, but you never lose principal due to market declines. Immediate annuities begin payments within 12 months of purchase and are ideal for retirees who need income now, while deferred annuities accumulate value over years or decades before converting to an income stream.
See also: Annuity Calculator · Retirement Calculator · Future Value Calculator
→ The 4% rule is a starting point, not gospel. Withdrawing 4% of your portfolio annually (adjusted for inflation) has historically sustained a 30-year retirement. But low-return environments or longer retirements may require 3–3.5%. Use this calculator to stress-test different rates.
→ Guaranteed annuities trade growth for certainty. Insurance company annuities offer guaranteed income but typically lower returns than a diversified portfolio. The peace of mind has real value — especially for essential expenses like housing and food.
→ Consider a "bucket" strategy. Keep 1–2 years of expenses in cash, 3–5 years in bonds, and the rest in growth investments. This prevents forced selling during market downturns while maintaining long-term growth. See our Retirement Calculator.
→ Delaying Social Security increases your annuity. Each year you delay Social Security past 62 (up to 70) increases your benefit by about 7–8%. This is one of the best "annuity purchases" available. Factor Social Security into your total payout plan.
See also: Retirement Calculator · Annuity Calculator · Savings Drawdown · RMD Calculator · Pension vs Lump Sum