How Much Income Can Your Savings Pay? Annuity Payouts Explained

Published October 12, 2026

Free tool: Annuity Payout Calculator→

When you retire or receive a lump sum, a key question is how much regular income it can provide. In finance, a series of equal payments drawn from a balance that keeps earning returns is called an annuity, and the math answers two questions: how much a balance can pay, and how much you need for the income you want. This guide covers both, using the free Annuity Payout Calculator.

How much income a lump sum can pay

The payment is set so the balance, still invested, runs down to exactly zero at the end of the period.

Example: $500,000 earning 5% a year, paid out monthly over 25 years:

• Monthly income: $2,890.69
• Total paid out: $867,207
• Paid by investment growth: $367,207, or 42% of all the income

Stretching the payout to 30 years lowers the income to $2,650.28 a month.

How much you need for a target income

Turn it around to find the savings needed for an income. To receive $3,000 a month for 25 years at 5%, you need about $518,907.

Keeping up with inflation

A fixed payment loses buying power each year. If you want the income to rise 2.5% a year, the same $500,000 starts lower, at $2,250.77 a month, and grows to $4,071.03 in the final year.

Payments at the start or end of each period

Paying at the start of each period (an annuity due) instead of at the end (an ordinary annuity) gives the money slightly less time to grow, so each payment is a little smaller for the same balance. The difference is small with monthly payments.

This isn't an insurance annuity

The calculator models drawing income from your own investments over a fixed period. It's different from buying an annuity from an insurance company:

• Your own drawdown runs out at the end of the period you choose, and the returns aren't guaranteed. Whatever is left is yours.
• An insurance annuity can pay a guaranteed income for life, however long you live, in exchange for handing over the money. The payout depends on your age, interest rates and the insurer.

Many retirees use both: guaranteed income to cover essentials and investments for the rest. To see what a future income is worth today, see Present Value Explained.

How to use the Annuity Payout Calculator

1. Open the Annuity Payout Calculator.
2. Choose a mode: Income from my savings or Savings needed for an income.
3. Enter the starting balance or the income you want, the annual return and the payout period.
4. Choose how often you're paid (monthly, quarterly or yearly), whether payments come at the start or end of each period and any yearly income increase.
5. Read the results: the income or the savings needed, the first and final payments, the total paid out and how much comes from investment growth, with charts of the balance and where each year's income comes from, plus a year-by-year table.

Frequently asked questions

How much monthly income will $500,000 provide?

At a 5% return over 25 years, about $2,890 a month. Over 30 years, about $2,650.

How much do I need to get $3,000 a month?

About $518,907 to pay $3,000 a month for 25 years at a 5% return. A longer period or a lower return needs more.

What's the difference between this and the 4% rule?

The 4% rule aims to make savings last about 30 years or more with inflation raises and a cushion for bad markets. This calculator pays out exactly over the period you choose at a steady return.