Calculate the monthly payout from a fixed annuity based on your principal, interest rate, and payout period.
This calculator estimates the monthly payment (payout) that a lump sum of money can generate over a fixed period, assuming a given interest rate and monthly compounding. It models a fixed-term, fixed-rate annuity: you invest a principal amount and receive equal monthly payments until both the principal and earned interest are fully paid out. This is useful for retirement income planning, structuring account-based pension drawdowns, or understanding what a lump sum can sustain in regular income over time.
This calculator uses the standard amortisation formula — the same formula that determines a loan repayment — applied in reverse: rather than making payments to pay off a loan, you are drawing payments from a balance that earns interest. Each month, interest accrues on the remaining balance, the payment is deducted, and the process repeats until the balance reaches zero at the end of the payout period.
Formula: Monthly Payment = Principal × [Monthly Rate × (1 + Monthly Rate)N] ÷ [(1 + Monthly Rate)N − 1], where Monthly Rate = Annual Rate ÷ 12 and N = Payout Years × 12. Total Payments = Monthly Payment × N. Total Interest = Total Payments − Principal.
Example: A A$100,000 lump sum invested at 4.5% per year (example rate — enter your expected rate) paying out over 20 years: monthly payout ≈ A$632.65 per month, for a total of A$151,835.85 paid out over 20 years — of which A$51,835.85 is earned interest on the invested principal. The balance reaches zero at the end of 20 years. (Note: this example is for illustration purposes only.)
In the Australian retirement system, annuities are a structured income product typically provided by life insurance companies, where a retiree exchanges a lump sum (often from superannuation) for a guaranteed income stream — either for a fixed term or for life. A lifetime annuity guarantees income regardless of how long you live, which is valuable for managing longevity risk (the risk of outliving your savings). Term annuities, as modelled by this calculator, provide income for a specific period and return the balance to zero at the end of that period (though some products include a residual value or return of capital feature). Account-based pensions (ABPs) are the most common retirement income product for Australians with superannuation — these are not fixed annuities, but flexible drawdown accounts where you withdraw a minimum percentage of the balance each year and the remaining balance continues to be invested. The minimum annual drawdown rates for ABPs are set by the government and vary by age, starting at 4% for those aged 65-74 and increasing at older ages. Unlike a fixed annuity, an ABP can run out if returns are poor or withdrawals are high, but also can grow if returns exceed withdrawals — there is no guarantee of income for life unless you convert the balance to a lifetime annuity.
A fixed annuity provides guaranteed equal payments for a set term (or life), regardless of investment performance — the income is certain but inflexible. An account-based pension (ABP) keeps your superannuation in an investment account from which you draw income at a minimum rate set by the government, with the balance remaining invested and exposed to market returns — income is flexible but not guaranteed to last if returns are poor or withdrawals are high. ABPs are by far the most common retirement income product in Australia, while annuities are less commonly used but offer income certainty.
Longevity risk is the risk of outliving your retirement savings. A fixed-term annuity reduces this risk for a specified period, but does not eliminate it — if you live beyond the term, payments stop. A lifetime annuity (from a life insurer) eliminates longevity risk by guaranteeing income for as long as you live, regardless of how long that is. The tradeoff is that lifetime annuities typically offer lower monthly payments than term annuities, because the insurer must price in the possibility that you will live much longer than average.
Yes, in most cases. For annuities paid from superannuation in retirement (pension phase, generally from age 60+), payments are typically tax-free for individuals aged 60 or older. For annuities funded from non-super money, the interest component of each payment is generally assessable at your marginal tax rate — only the return of principal is not taxable. The tax-free proportion of each payment is determined by the tax-free component and taxable component rules, which can be complex — consult a financial adviser or the ATO for guidance specific to your situation.
The government sets minimum annual drawdown rates for account-based pensions, which increase with age: 4% for ages 65-74, 5% for 75-79, 6% for 80-84, 7% for 85-89, 9% for 90-94, and 14% for ages 95 and over. These are minimums — you can withdraw more if needed. These rates ensure that account-based pension balances are drawn down over time rather than being left to accumulate tax-free indefinitely.
For a conservative retirement income plan, use a rate that reflects the return on a lower-risk portfolio — such as 3-4% for a defensive or balanced option in superannuation, in real (inflation-adjusted) terms. Using a nominal rate (before inflation) means the purchasing power of the fixed payout declines over time as prices rise. For a long 20-30 year retirement, using a conservative real return rate helps ensure the projections are sustainable. Some financial planners use a "balanced" assumption of around 5-6% nominal for diversified super funds, but with appropriate risk caveats.
You can use it as a starting point — enter your projected retirement superannuation balance as the principal, an assumed return rate net of fees, and the number of years you want the funds to last. The resulting monthly payout is the maximum equal monthly drawdown that would exhaust the balance by the end of the period. Keep in mind that actual superannuation balances grow and fluctuate with investment returns, so this fixed-rate calculation is a simplification — for variable return scenarios, use our Retirement Calculator.
Disclaimer: The information, rates, and figures provided on this page are for educational and illustrative purposes only and do not constitute financial advice. The interest rate used is an example only and does not represent a rate guaranteed by any specific annuity product or investment — actual rates offered by annuity providers vary and change over time. This calculator models a fixed-rate term annuity and does not represent the terms of any specific product offered by any Australian financial institution or life insurer. Annuity and retirement income planning is complex and depends on individual circumstances, age, health, tax position, and superannuation rules. Consult a qualified financial adviser before making any retirement income decisions.