Annuity Payout Calculator: Monthly Payments and Taxes

An annuity payout is the level payment that spends a lump sum down to zero over the payout period at a given interest rate: $100,000 at 5% for 10 years pays $1,060.66 a month. For a life annuity, only an insurer's quote tells you the payment. Tax depends on the money that bought it: payments from an IRA or 401(k) annuity are fully taxable, while an annuity bought with after-tax money returns part of your cost tax-free in every payment. In that 10-year example, bought with $100,000 of after-tax money, $833.67 of each payment is tax-free and only about $226.98 is taxable.

The calculator below does the payout math for a fixed period, solves it in reverse for the lump sum a target payment needs, and checks a life-annuity quote. It then splits each payment into its tax-free and taxable parts using the IRS methods, and estimates the federal tax on the taxable part.

This calculator is for informational purposes only. Its results are estimates based on 2026 federal tax tables and your inputs, not tax or investment advice. Your insurer's contract and Form 1099-R are what count.

How much does a $100,000 annuity pay per month?

For a period-certain payout, the payment depends only on the lump sum, the interest rate and the number of years. The table shows the monthly payment per $100,000, with the first payment one month after the start. Scale it for your amount: $250,000 is 2.5 times each figure.

Two things stand out. Stretching the period from 10 to 25 years cuts the payment by 42% to 51%, because the same money covers 300 payments instead of 120. Each extra point of interest matters more the longer the period: going from 3% to 6% raises a 10-year payment by 15%, but a 25-year payment by 36%.

A life annuity has no fixed number of payments, so it isn't in this table. Insurers price it from their own mortality assumptions, expenses and interest rates, and quotes for the same age can differ. Use the calculator's quote mode to compare a life quote with a fixed-period payout.

The annuity formula behind the payment

The payout is the present-value-of-an-annuity formula solved for the payment:

• Payment = PV × i ÷ (1 − (1 + i)^−n)
• PV (lump sum needed) = Payment × (1 − (1 + i)^−n) ÷ i

PV is the lump sum, i is the rate per payment period (the annual rate divided by payments per year), and n is the total number of payments. If the first payment comes on the start date instead of one period later (an "annuity due"), divide the payment by (1 + i), or multiply the PV by it.

The arithmetic for $100,000 at 5% over 10 years, monthly: i = 0.05 ÷ 12 = 0.0041667 and n = 120. (1.0041667)^−120 = 0.60716, so 1 − 0.60716 = 0.39284. The payment is $100,000 × 0.0041667 ÷ 0.39284 = $1,060.66. Over 120 payments that adds up to $127,278.62, so $27,278.62, or 21.4% of everything paid, is interest.

With a yearly increase, every payment in year k is the first payment × (1 + increase)^k. The tool adds up the present value year by year and solves for the first payment. Rising payments start lower. $200,000 at 5% over 20 years pays $1,319.91 a month level, or $1,122.41 a month rising 2% a year to $1,635.14 in the final year. The rising version pays $327,259.96 in total against $316,778.75, because more of the money stays invested longer.

How the calculator works

1. Payout. In payment mode it applies the formula above to your lump sum. In lump-sum mode it multiplies your target payment by the present-value factor. The year-by-year table shows the interest credited and the balance left, which reaches $0 with the last payment.
2. Life quote. For a life annuity you enter the premium and the insurer's payment. The tool shows the yearly income, the payout rate (income ÷ premium), and how many years of payments it takes to get the premium back. It also shows the interest rate the quote implies if payments run for the IRS life-expectancy multiple. That multiple is a tax table, not a forecast of how long you will live.
3. Tax-free part. For a nonqualified annuity it uses the General Rule of IRS Publication 939, the exclusion ratio. For an employer-plan annuity with after-tax contributions it uses the Simplified Method of IRS Publication 575. Qualified money with no after-tax contributions is fully taxable.
4. Federal tax. The first full year's taxable payments are stacked on your other income with the 2026 brackets and standard deduction from Rev. Proc. 2025-32, plus the age-65 add-on and the senior deduction when they apply. It uses the same federal engine as the IRA withdrawal tax calculator, so the two tools agree.
5. Extra taxes. Before 59½, 10% of the taxable part unless you pick an exception that applies. For a nonqualified annuity, the 3.8% net investment income tax if your income is above the threshold.
6. Cost recovery. The tool tracks how much of your investment you have recovered tax-free. Once all of it is back, it shows that later payments are fully taxable and what they would cost in tax.

Worked examples with the arithmetic

All examples use a single filer with $40,000 of other income and the 2026 federal figures. At 66 the deduction is $16,100 standard + $2,050 age-65 add-on + $6,000 senior deduction = $24,150. That leaves $15,850 of taxable income before the annuity, inside the 12% bracket, which runs from $12,400 to $50,400.

$100,000 after-tax, 10 years certain, starting at 66

• Payment: $1,060.66 a month, $12,727.86 a year (from the formula above).
• Expected return: $1,060.66 × 120 payments = $127,278.62.
• Exclusion ratio: $100,000 ÷ $127,278.62 = 0.78568, rounded to 0.786 as Publication 939 requires.
• Tax-free per payment: $1,060.66 × 0.786 ≈ $833.67. Taxable: about $226.98 (cents rounded).
• Taxable per year: $226.98 × 12 = $2,723.76. Federal tax: $2,723.76 × 12% = $326.85.

Because 0.786 is slightly more than the exact ratio, the tax-free total would pass $100,000 just before the end. The law caps the exclusion at your investment (IRC §72(b)(2)), so the last payment is a little more taxable than the others.

The same payout from an IRA

Put the same $1,060.66 a month inside a traditional IRA and there is no after-tax cost to recover. All $12,727.86 a year is taxable, and the federal tax is $12,727.86 × 12% = $1,527.34, almost five times the nonqualified figure. The payout is identical; only the source of the money changed.

Starting the 10-year payout at 50

At 50 there is no age-65 add-on or senior deduction, so taxable income before the annuity is $40,000 − $16,100 = $23,900, still in the 12% bracket. The income tax is again $326.85. Unless an exception applies, add a 10% additional tax on the taxable part: $2,723.76 × 10% = $272.38 a year. If the contract is a single-premium immediate annuity bought within a year of the first payment, the exception in §72(q)(2)(I) removes the $272.38.

A $100,000 life annuity quote at 65 paying $600 a month

• Yearly income: $7,200. Payout rate: $7,200 ÷ $100,000 = 7.2%. Years to get the premium back, ignoring interest: $100,000 ÷ $7,200 = 13.9.
• Expected return: $7,200 × 20.0 (the Table V multiple for age 65) = $144,000.
• Exclusion ratio: $100,000 ÷ $144,000 = 0.694. Tax-free per payment: $600 × 0.694 = $416.40, taxable $183.60.
• First full year: $4,996.80 tax-free, $2,203.20 taxable, federal tax $2,203.20 × 12% = $264.38.
• Cost recovered after $100,000 ÷ $416.40 = 240.2, so 241 payments: just over 20 years, around age 85. After that, all $7,200 is taxable: $864 a year at 12%.
• If payments run exactly 20 years, the quote equals an annual return of about 3.89%. Each extra year of payments raises that return.

Employer pension annuity with after-tax contributions

Publication 575 works through this case: $31,000 of after-tax contributions, a joint and survivor annuity, both annuitants 65 at the start, and $1,200 a month. Combined ages of 130 give 310 anticipated payments (Table 2), so $31,000 ÷ 310 = $100 of each payment is tax-free. Of $14,400 a year, $13,200 is taxable. After 310 payments, every payment is fully taxable.

How annuity payments are taxed: qualified vs nonqualified

The source of the money decides the method, not the type of contract.

The exclusion ratio (General Rule)

Section 72(b) excludes from income the share of each payment equal to your investment in the contract divided by the expected return. Investment in the contract is what you paid, minus anything you received tax-free before payouts began (§72(c)(1)). The expected return depends on the payout:

• Fixed period: the payment times the number of payments (§72(c)(3)(B)).
• Single life: the annual payment times the multiple from Table V of Publication 939 for your age at the birthday nearest the annuity starting date.
• Joint and survivor, same payment to the survivor: the annual payment times the Table VI multiple for both ages. Table VI is a grid, so the calculator asks you to read your number from it.

Selected Table V multiples:

These multiples assume monthly payments. For quarterly, semiannual or annual payments, Publication 939 adjusts the multiple by up to ±0.5 depending on how many months pass before the first payment; the calculator applies that adjustment. Payments that vary in amount, such as a contract with a yearly increase, use the variable-annuity method instead. The tax-free amount is your investment divided by the number of expected payments.

After you recover your cost

For an annuity starting after 1986, the total you exclude can never exceed your investment. Once it is all back, every payment is fully taxable (Pub. 939, "Exclusion Limits"). If payments stop at death before you recover it all, the rest is deductible on the final return (§72(b)(3)). A refund feature or a guaranteed period on a life annuity lowers the investment used in the ratio, and Publication 939's Table VII sets that reduction. The calculator leaves this out, so for such contracts it overstates the tax-free part a little.

The Simplified Method for after-tax money in employer plans

If an employer plan annuity starts after November 18, 1996, and you have after-tax contributions in it, you must generally use the Simplified Method (IRC §72(d)(1), Pub. 575). The exception is when you are 75 or older and entitled to 5 or more years of guaranteed payments. The tax-free monthly amount is your cost divided by a set number of payments:

For a fixed-period annuity, the divisor is the number of monthly payments in the contract. An IRA annuity with nondeductible contributions is different: its basis is tracked on Form 8606, which this tool doesn't model.

Net investment income tax, withholding and Form 1099-R

The taxable part of a nonqualified annuity counts as net investment income (IRC §1411(c)). That means a 3.8% tax on the lesser of that income or your modified AGI above $200,000 (single or head of household), $250,000 (joint) or $125,000 (married filing separately). Distributions from qualified plans and IRAs are excluded. The NIIT calculator runs the full test with your other investment income.

Periodic annuity payments are withheld like wages unless you choose otherwise, using Form W-4P (Pub. 575). Payments for life, or for 10 years or more, aren't eligible rollover distributions (IRC §402(c)(4)(A)), so the mandatory 20% withholding on plan payouts doesn't apply. The insurer reports each year on Form 1099-R. Box 2a holds the taxable amount and box 5 the cost recovered tax-free; box 7 code D marks a nonqualified annuity payment that may be subject to the 3.8% tax (Form 1099-R instructions).

The 10% early withdrawal tax on annuities

Annuity money taken before 59½ can carry a 10% additional tax on the part included in income. For a nonqualified annuity it comes from §72(q), which does not apply to payments:

• made on or after age 59½, or after the holder's death;
• attributable to disability;
• in a series of substantially equal periodic payments for your life or life expectancy (or joint lives), at least annually;
• allocable to investment in the contract before August 14, 1982;
• under an immediate annuity: bought with a single premium, starting within one year of purchase, and paying substantially equal amounts at least annually (§72(u)(4));
• under a qualified personal injury settlement funding asset, or a contract an employer bought when a qualified plan ended and held until you left.

Annuities inside an IRA or employer plan fall under §72(t) instead. There, life-based payments from an employer plan count only if they begin after you separate from service (§72(t)(3)(B)). Leaving the employer in or after the year you turn 55 is also an exception for plan money. The guide to IRA withdrawal tax rules and penalties covers the full §72(t) list, and the 401(k) withdrawal calculator handles lump withdrawals from a plan.

What is an annuity? Immediate vs deferred, fixed vs variable vs indexed

An annuity is a contract, usually with an insurance company, that turns money into a series of payments. Publication 939 defines it as payments at regular intervals over more than one full year. Contracts differ on two axes.

When payments start. An immediate annuity starts paying within about a year of a single premium. A deferred annuity grows first, through an accumulation phase that can last years, and is turned into payments ("annuitized") or withdrawn later. Tax on the growth is deferred until money comes out.

How the value grows. A fixed annuity credits a rate the insurer declares. A variable annuity's value follows the investment subaccounts you choose, so payments can rise or fall. A fixed indexed annuity credits interest based on a market index, within limits such as caps and participation rates set by the contract, and does not pass index losses through to your value. None is better in general: they trade certainty, fees and upside differently, and the contract terms are what matter. For payout math this calculator treats the rate as constant, which fits a fixed payout best.

A lottery "annuity option" is not an insurance contract. It is a prize paid in installments, and the exclusion ratio and §72(q) rules here don't apply to it. The lottery tax calculator covers that case.

Annuity payout options: life, joint and survivor, period certain

For the same premium, life only pays the most per month because nothing is owed after death. Each guarantee or survivor benefit lowers the payment. A period-certain payout is the only one you can fully calculate without an insurer, which is why the calculator prices it directly and asks for a quote for the others.

Surrender charges and withdrawals before annuitizing

Many deferred annuities charge a surrender fee if you take out more than a set free-withdrawal amount during the first contract years. The fee is a percentage of the excess that usually shrinks each year until it reaches zero. The schedule is in your contract. The fee is separate from tax: a withdrawal can trigger both.

For tax, a withdrawal from a nonqualified annuity before payouts start comes out of earnings first (IRC §72(e)). Publication 575 works through an example: you withdraw $7,000 when the contract is worth $16,000 and your investment is $10,000. The first $16,000 − $10,000 = $6,000 is taxable earnings, and only the remaining $1,000 is a tax-free return of cost. Before 59½, the $6,000 can also draw the 10% tax. Annuitizing spreads the earnings over every payment instead.

Exchanging an annuity tax-free: section 1035

IRC §1035 lets you exchange an annuity contract for another annuity, or for a qualified long-term care contract, without recognizing gain. A life insurance policy can also be exchanged for an annuity. Your investment in the old contract carries over to the new one, and the exchange appears on Form 1099-R with code 6 in box 7. Publication 575 adds that the new contract's purchase date is the old one's for the immediate-annuity exception. Before exchanging, compare any surrender charge on the old contract with a new surrender period on the new one.

Annuity vs systematic withdrawals from your own savings

A period-certain annuity does nothing you couldn't do by drawing the same amount from your own account each month. The how long will my money last calculator runs that do-it-yourself version, including Social Security or a pension as other income. The difference is that the insurer guarantees the rate. A life annuity adds what withdrawals can't: payments that continue however long you live, in exchange for giving up the principal.

Before buying income, look at the annuity you may already have. Social Security is a lifetime benefit adjusted for inflation; the Social Security calculator shows how claiming age changes it. To keep money in a traditional IRA and take withdrawals instead, the IRA withdrawal tax calculator shows the tax on each one. The RMD calculator shows the minimum that must come out each year once required distributions begin, which you can compare with a period-certain payout from this tool. More tools for planning retirement income and its tax are collected in the retirement income tax hub.