A worked example
A $300,000 lump sum, earning 5% annually while it pays out over 20 years, supports a fixed monthly payout of about $1,980. Over the full period that's roughly $475,170 paid out in total — about $175,170 more than the starting balance, funded by interest along the way.
Frequently asked questions
Why is the monthly payout higher than just dividing the balance by the number of months?
Because the remaining balance keeps earning interest throughout the payout period, the balance can sustain a payout somewhat higher than simple division would suggest — the return rate is doing some of the work alongside the principal.
What's the difference between this and a lifetime annuity from an insurer?
This calculates a 'period certain' payout — a fixed amount for a fixed number of years, after which the balance reaches exactly zero. An insurance company's lifetime annuity instead guarantees payments for as long as you live, which it prices using life expectancy tables and built-in fees, typically resulting in a different (often lower) monthly amount for the same lump sum.
What happens if I withdraw more than this calculated amount?
The balance will run out before the end of the chosen period — this calculator shows the exact amount that lasts the full term at the assumed return rate, not a minimum or a suggestion.
This calculator provides estimates for general informational purposes only and is not financial advice. It assumes a constant return rate, which real investments do not provide — actual results will vary.