How is annuity payout taxed?

For non-qualified annuities (after-tax funds), only the interest portion of each payment is taxable — the principal return is excluded. For qualified annuities (IRA/401k funds), the entire payment is taxable as ordinary income. The IRS exclusion ratio governs the tax-free portion for non-qualified contracts.

Annuity Payout Calculator 2026 – Monthly Income From Any Balance

Q: How much does a $300,000 annuity pay per month?

At a 5% annual rate over 20 years, a $300,000 annuity generates approximately $1,980/month. At 4%, the monthly payment is approximately $1,818; at 6%, approximately $2,149. The interest rate has a significant impact on monthly income.

The annuity payout calculator provides a precise estimate of the periodic income your annuity balance will generate over a defined distribution period. Enter your current balance, the applicable annual interest rate, and the number of years over which you require income.

Last updated May 2026 · Methodology per SSA actuarial life tables

21 yrs

Avg life expectancy from 65 (SSA 2024)

~$150

Monthly income change per 1% rate shift on $300K

50%

Probability a 65-yr-old woman lives past 86

Rate Matters More Than You Think On a $250,000 balance, the difference between a 4% and 6% payout rate is approximately $325/month — or $78,000 over 20 years. Shopping for even a 0.5% higher rate from a different insurer can meaningfully improve your retirement income.

How Annuity Payouts Are Calculated

The standard annuity payout formula is: PMT = PV × [r(1+r)^n] / [(1+r)^n − 1], where r is the periodic interest rate and n is the total number of payment periods. At a 5% annual rate with monthly distributions, the periodic rate r equals 0.4167%. This formula reduces the account balance to precisely zero at the conclusion of the payout term — both principal and interest are consumed proportionally within each payment.

What Affects Your Monthly Payment?

Three primary variables govern payout amount. A higher opening balance increases payments proportionally. A higher credited rate elevates payments, as the remaining principal continues generating earnings throughout the distribution period. A shorter payout term increases payments by compressing the same balance into fewer years. Given that the average American retiree plans for 20–30 years of income, the interest rate assumption carries particular weight.

Complete Annuity Payout Table — All Amounts & Ages at 5%

Every major investment amount at every common retirement age, assuming a 5% rate. Click any amount to see a full pSEO analysis page with rate comparisons, inflation projections, and scenario analysis.

Investment	At 50 (35 yr)	At 55 (30 yr)	At 60 (25 yr)	At 65 (20 yr)	At 70 (15 yr)
$50,000	$252/mo	$268/mo	$292/mo	$330/mo	$396/mo
$100,000	$504/mo	$537/mo	$585/mo	$660/mo	$791/mo
$250,000	$1,261/mo	$1,342/mo	$1,462/mo	$1,650/mo	$1,977/mo
$500,000	$2,521/mo	$2,685/mo	$2,923/mo	$3,300/mo	$3,954/mo
$1,000,000	$5,043/mo	$5,370/mo	$5,846/mo	$6,600/mo	$7,908/mo

*5% annual rate, period-certain. Each cell links to a full analysis page with rate comparisons and inflation projections. Lifetime annuity quotes vary by insurer and gender.

Period-Certain vs. Lifetime Payouts

This calculator models a period-certain payout — a fixed distribution term regardless of survivorship. Insurance company lifetime annuities use a distinct actuarial methodology incorporating life expectancy tables. For a 65-year-old annuitant, a lifetime annuity typically produces a modestly lower monthly benefit than a 20-year period-certain arrangement, as the insurer assumes full longevity risk. For a direct actuarial comparison, see our immediate annuity calculator.

Frequently Asked Questions

How much does a $300,000 annuity pay per month?

At 5% over 20 years, a $300,000 annuity generates approximately $1,980/month. At 4%, approximately $1,818; at 6%, approximately $2,149. The interest rate assumption has a material influence on income. Always use this calculator with the actual credited rate from your insurer's illustration. For fixed-rate product comparisons, see our fixed annuity calculator.

What is the difference between an annuity payout and a pension?

A pension is a defined-benefit plan provided by an employer, guaranteeing a specified monthly benefit based on salary and years of service. An annuity payout is a contractual arrangement between you and an insurance company, converting a lump sum into a structured income stream. Both deliver regular payments, but annuities are individually purchased while pensions are employer-funded. Many retirees without traditional pensions use annuities to replicate the predictable income they lack.

Can I outlive my annuity?

With a period-certain annuity, payments stop at the end of the specified term. A lifetime annuity guarantees income for your entire life regardless of longevity. Per SSA actuarial tables, the average American woman reaching 65 has a 50% probability of surviving past age 86 — underscoring the significance of longevity risk. See our immediate annuity calculator for lifetime payout modeling.

How is the payout taxed?

For non-qualified annuities (after-tax contributions), only the interest component of each payment is taxable as ordinary income — the principal return is tax-free. For qualified annuities (IRA/401k rollover), the entire payment is taxable as ordinary income. The IRS exclusion ratio governs the tax-free portion for non-qualified contracts. Consult a qualified tax professional, particularly when distributing proceeds from a large qualified account.

What is the best way to take annuity distributions?

The optimal distribution strategy depends on your other income sources, tax bracket, and longevity concerns. A common approach: take smaller withdrawals in early retirement years when Social Security hasn't started, then reduce annuity withdrawals after Social Security begins at 70. Coordinate annuity income with Required Minimum Distributions (RMDs) from IRAs starting at age 73. A fee-only fiduciary financial advisor can model these interactions for your specific situation.

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Select your investment amount for a complete payout analysis: rate tables, inflation projections, and scenario comparisons.

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Each hub page shows full payout tables for every investment amount at that age, plus age-specific retirement context and Social Security integration guidance.

Age 50

FIRE & early retirement

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Age 70

Late optimization