Key takeaways
- At a 5% return, $500,000 pays $3,954 a month over 15 years, $3,300 over 20, $2,923 over 25 and $2,684 over 30.
- The payouts scale linearly with the premium: $250,000 pays exactly half of the $500,000 figure, $1 million exactly double.
- The formula is Payment = P × i ÷ (1 − (1 + i)−N) — premium P, monthly rate i, number of payments N.
- Starting later pays more per month purely because there are fewer payments left: $500,000 spread to age 90 pays $2,684 a month from 60 but $3,300 from 70.
- An insurer's lifetime quote is not this number. A real single-premium immediate annuity pools mortality risk, so it can pay more than a self-funded schedule — and it stops when you die rather than leaving a balance.
The direct answer
Spread $500,000 evenly over a fixed number of years, letting the unspent balance keep earning 5% a year, and the monthly cheque is:
- 15 years — $3,954 a month ($47,448 a year)
- 20 years — $3,300 a month ($39,600 a year)
- 25 years — $2,923 a month ($35,076 a year)
- 30 years — $2,684 a month ($32,208 a year)
Every one of those figures exhausts the $500,000 exactly at the end of the period. Nothing is left over, which is the trade you are making: a bigger cheque in exchange for a shorter guarantee.
The full table, $50,000 to $2 million
| Lump sum | 15 years | 20 years | 25 years | 30 years |
|---|---|---|---|---|
| $50,000 | $395 | $330 | $292 | $268 |
| $100,000 | $791 | $660 | $585 | $537 |
| $200,000 | $1,582 | $1,320 | $1,169 | $1,074 |
| $250,000 | $1,977 | $1,650 | $1,461 | $1,342 |
| $300,000 | $2,372 | $1,980 | $1,754 | $1,610 |
| $500,000 | $3,954 | $3,300 | $2,923 | $2,684 |
| $1,000,000 | $7,908 | $6,600 | $5,846 | $5,368 |
| $2,000,000 | $15,816 | $13,199 | $11,692 | $10,736 |
Where the numbers come from
This is the standard annuity payment formula — the same one that prices a mortgage, run backwards:
P is the lump sum, i the monthly interest rate (annual rate divided by 12) and N the total number of payments (years × 12).
Worked, step by step
P = $500,000, a 5% annual return, over 20 years:
- i = 0.05 ÷ 12 = 0.0041667; N = 20 × 12 = 240.
- (1 + i)−N = 1.0041667−240 = 0.36864.
- 1 − 0.36864 = 0.63136.
- P × i = $500,000 × 0.0041667 = $2,083.33.
- Payment = $2,083.33 ÷ 0.63136 = $3,300 a month.
Over 240 months that is $792,000 of income from $500,000 of principal. The extra $292,000 is interest earned on the shrinking balance — which is exactly why a longer payout period does not cut the cheque proportionally.
The interest rate matters more than people expect
Hold the premium and the term fixed and vary only the rate. $500,000 over 25 years:
| Annual return | Monthly income | Total paid out |
|---|---|---|
| 0% | $1,667 | $500,000 |
| 3% | $2,371 | $711,300 |
| 4% | $2,639 | $791,700 |
| 5% | $2,923 | $876,900 |
| 6% | $3,222 | $966,600 |
Three percentage points of return is worth $850 a month — a 36% difference in income from the same $500,000. When an insurer quotes you a payout, the rate baked into it is doing most of the work, and it is rarely disclosed directly.
Starting age: why 70 pays more than 60
If the goal is income to age 90, starting later means fewer payments to fund from the same money:
| Start age | Years of payments | Monthly income |
|---|---|---|
| 60 | 30 | $2,684 |
| 62 | 28 | $2,768 |
| 65 | 25 | $2,923 |
| 67 | 23 | $3,052 |
| 70 | 20 | $3,300 |
| 75 | 15 | $3,954 |
This is the same mechanism behind delaying Social Security, and it is worth comparing the two before buying anything. Delaying a benefit you already own is usually cheaper than buying income from an insurer.
What the payout figures leave out
- Tax. Money from a qualified account (an IRA or 401(k) annuity) is fully taxable as ordinary income. In a non-qualified annuity bought with after-tax money, the exclusion ratio makes part of each payment a tax-free return of your principal. See what a withdrawal really costs with the withdrawal tax calculator.
- Inflation. A level $3,300 buys roughly half as much after 25 years at 3% inflation. Inflation-adjusted annuities exist and start materially lower. The inflation impact calculator puts a number on it.
- Fees and surrender charges. Variable and indexed annuities carry ongoing costs that a fixed immediate annuity does not, and most contracts penalise early exit for several years.
- Longevity beyond the term. A 20-year certain annuity bought at 65 pays nothing from 85 onward. If that is the risk you are trying to remove, a lifetime contract — not a fixed term — is the product that removes it.
Run it on your own number
The annuity payout calculator takes any premium, rate and period and shows both the fixed-term and to-life-expectancy versions side by side. If you are weighing this against simply drawing down a portfolio, the retirement drawdown calculator and how long will my money last answer the same question without an insurer in the middle.
Frequently asked questions
How much does a $500,000 annuity pay per month?
About $3,300 a month over a 20-year payout period at a 5% return, $2,923 over 25 years and $2,684 over 30 years. Over 15 years it is $3,954. These figures exhaust the $500,000 exactly at the end of the term, and they are before tax.
How much does a $100,000 annuity pay per month?
About $660 a month over 20 years at a 5% return, $585 over 25 years and $537 over 30 years. Payouts scale linearly with the premium, so $100,000 pays exactly one fifth of what $500,000 pays over the same period at the same rate.
How much does a $1 million annuity pay per month?
About $6,600 a month over 20 years at a 5% return, $5,846 over 25 years and $5,368 over 30 years. Over a 15-year period it is $7,908 a month, or $94,896 a year, which exhausts the million exactly at the end.
Is annuity income taxed?
It depends where the money came from. Payments from an annuity held inside an IRA or 401(k) are fully taxable as ordinary income. In a non-qualified annuity bought with money you had already paid tax on, the exclusion ratio treats part of each payment as a tax-free return of principal and taxes only the earnings portion.
Does an annuity pay more if I wait until 70?
Yes, if the income has to last to a fixed age. $500,000 running to age 90 pays $2,684 a month starting at 60 but $3,300 starting at 70, simply because there are 120 fewer payments to fund. Insurer lifetime quotes rise with age for the same reason, plus shorter life expectancy.
Is an annuity actually the missing piece?
A payout table answers one question. Planomy answers the one behind it: given your Social Security, taxes and spending, how much guaranteed income do you actually need? Build the projection, then decide. Free, private, and running in your browser.