How to use this calculator
- Enter your Starting balance, the lump sum you will draw from.
- Set the Annual return you expect on the money while it is still invested.
- Choose the Years of payouts you want the income to last.
- Read the Monthly payout, the total paid out and the share that came from growth; the table shows the balance each year.
How the payout is calculated
This is the present value of an annuity solved for the payment. The question is: what level monthly amount, taken at the end of each month, uses up exactly your balance after the chosen number of years while the remainder keeps earning the return?
M = B · r / (1 − (1 + r)^(−n))- M = monthly payout
- B = starting balance
- r = monthly rate, (1 + annual return)^(1/12) − 1
- n = number of monthly payouts (years × 12)
The calculator converts the annual return to an equivalent monthly rate, so 5% a year compounds to exactly 5% over twelve months, then solves for the payment.
Example: $500,000 over 25 years at 5%
With the defaults the monthly payout is $2,890.69, or $34,688 a year. Over 25 years you receive $867,207 in total, of which $367,207 is investment growth and the rest is your original $500,000.
Stretching the payout to 30 years lowers income to $2,650.28 a month (total $954,099). A 3% return instead of 5% over 25 years lowers it to $2,360.54. With a 0% return it is simply $500,000 ÷ 300 months, or $1,666.67.
What it tells you, and what it does not
A longer period or lower return means lower income. The trade-off is clear in the example: five more years cost about $240 a month, and two points of return cost about $530. The real choice is how long the money must last; see our how long will my money last calculator for the reverse question.
The payout here is level in dollars, so its buying power shrinks with inflation. The inflation calculator shows what a fixed income will be worth in the future.
Using it for planning
- Compare the figure with a quote for an insurance company annuity; the insurer's payout may differ because of fees, longevity pooling and guarantees.
- Use a conservative return, since poor early returns hurt a drawdown more than poor late returns.
- Test a longer period than your life expectancy suggests if you want to avoid running out of money.
- Add other income, such as pensions or government benefits, to see the total you would have.
- Check the tax treatment of withdrawals with an adviser; this calculator shows pre-tax figures.
Assumptions and limits
The model assumes a constant return, payments at the end of each month, a balance that reaches exactly zero and no taxes, fees or inflation adjustment. It does not model market volatility, which means the same average return can produce a very different outcome in real life.
It is not a quote for any insurance annuity and ignores life-contingent payouts, survivor benefits and surrender charges. For retirement decisions, talk to a licensed adviser and compare written quotes.
Frequently asked questions
How much monthly income can $500,000 provide?
Over 25 years at a 5% return, about $2,891 a month, using up the balance. Longer periods or lower returns reduce this.
What is the difference between this and an insurance annuity?
This tool assumes you invest the money and draw it down. An insurance annuity is a contract whose payout depends on the insurer's pricing, fees and sometimes your lifespan.
Why does a 0% return still give a payout?
Because the balance is just divided evenly across the months. Any return above 0% lets each payment be larger.
Does the payout keep up with inflation?
No. It is a fixed dollar amount, so its purchasing power falls over time. Plan for that by starting lower or adding other inflation-linked income.