How it works
This is the reverse of a present-value calculation: given a lump sum and an assumed rate, it solves for the level monthly payment that money could support over your payout years.
Who this is for
Anyone considering handing an insurer a lump sum in exchange for guaranteed monthly income, who wants a quick estimate before requesting real quotes.
Worked example
Putting in $300,000 for 20 years of payments at an assumed 5% rate produces roughly $1,980 a month — about $475,200 total if you collect every payment for the full term. A real insurer's quote will differ because it also prices in mortality risk and its own margin.
Frequently asked questions
Why would a real quote be lower than this estimate? Insurers build in their costs and profit margin, and lifetime annuities also pool mortality risk across many buyers, which changes the math versus a fixed-term calculation like this one.
Term-certain or lifetime — which should I use this for? Either — just set the years to your term, or to your life expectancy if you're estimating a lifetime annuity.
How does this compare to keeping a lump sum invested myself? See the annuity vs lump sum calculator to weigh guaranteed income against investing it yourself.