How this calculator works
This calculator models a fixed-term annuity payout: a balance that earns a steady return while you withdraw a level amount every month until it reaches zero. It works in two directions. "How much can I withdraw?" starts from a balance, a return rate and a target number of years, and solves for the monthly amount that exactly exhausts the balance in that time. "How long will it last?" starts from a fixed monthly withdrawal instead and simulates forward to see when the balance runs out.
The math is the mirror image of a loan payment: instead of paying down a debt with a level payment while interest accrues on the remaining balance, you are paying yourself down from a balance while interest still works in your favor. If your withdrawal never exceeds the interest the balance earns in a month, the balance never shrinks at all — it lasts indefinitely.
The formula
Monthly payout (fixed term): PMT = Balance × i ÷ (1 − (1 + i)⁻ⁿ)i = annual rate ÷ 12, n = monthsThis is the standard present-value-of-annuity formula, the same one used to compute a loan payment, applied to a balance being drawn down instead of a debt being paid off. "How long will it last" mode could be solved with the equivalent number-of-payments annuity formula, but this calculator simulates month by month instead, which handles the final partial month and the "lasts indefinitely" case directly.
Worked example: $100,000 at 6% over 20 years
- Balance $100,000, annual return 6% (monthly rate i = 0.5%), term 240 months.
- PMT = 100,000 × 0.005 ÷ (1 − 1.005⁻²⁴⁰) ≈ $716.43 per month.
- Over 240 months that totals about $171,943 withdrawn, of which roughly $71,943 is interest earned along the way, on top of the original $100,000.
- Running that same $716.43 monthly withdrawal back through the 'how long will it last' simulation depletes the balance in exactly 240 months, confirming the two modes agree.
Frequently asked questions
What does 'lasts indefinitely' mean?
If your monthly withdrawal is at or below the interest the balance earns that month, the balance does not shrink — it either holds steady or keeps growing, so it never technically runs out under the assumed constant return.
Does this account for inflation?
No. This calculator uses a level, fixed-dollar monthly withdrawal and a constant assumed return. For withdrawals that grow with inflation over a retirement horizon, see a retirement withdrawal calculator that models rising withdrawals over many years.
Is the return rate guaranteed?
No — this calculator assumes a constant annual return for simplicity, which real investments do not provide. A market downturn early in the payout period can deplete a balance faster than this steady-return model predicts.
How is this different from an insurance company annuity?
A commercial annuity contract from an insurer often pools longevity risk and may pay for life regardless of how long you live, for a price. This calculator is a simple math model of a self-managed balance drawn down over a term you choose, with no insurance component.
How much of my monthly payout is interest versus my original balance?
It depends on the balance, rate and term, but the worked example on this page shows the split for one case: a $100,000 balance paying out $716.43 a month for 20 years withdraws about $171,943 in total, of which roughly $71,943 is interest earned along the way and the rest is the original $100,000 balance. Early withdrawals draw more heavily on the interest the balance earns that month, while later withdrawals draw down more of the original balance itself, similar to a loan amortization schedule running in reverse.