Immediate Annuity Calculator — Fixed Payout from Lump Sum
An immediate annuity converts a lump sum into a guaranteed stream of payments that starts right away. Enter your premium, the assumed interest rate from your provider's quote, the payment frequency and the term to see the exact periodic payment, total payout, and interest earned.
$
%
Payment frequency
years
Fixed payment received each period for the full term
- 1
Periodic interest rate
r = 5% ÷ 12 ÷ 100 = 0.004167 - 2
Total payments
n = 20 × 12 = 240 - 3
Annuity discount factor
1 − (1 + 0.004167)^(−240) = 0.631355Present-value factor: how much $1 per period is worth as a lump sum today. - 4
Payment per period
100,000 × 0.004167 ÷ 0.631355 = 659.96
How does this calculator work?
Immediate annuity payment = PV × r / [1 − (1 + r)^(−n)], where PV is the lump sum, r is the periodic rate, and n is total payments. A $100k premium at 5%/yr for 20 years pays about $660/month ($158k total). This model covers fixed-term (period-certain) annuities only — life annuities depend on mortality tables.
Formula
How this is calculated
A fixed-term (period-certain) immediate annuity works like a reverse loan: you pay a lump sum (PV) to an insurance company or financial institution, which immediately begins returning equal periodic payments for a set number of years. The payment formula is derived from the present-value-of-annuity formula by solving for PMT: PMT = PV × r / [1 − (1 + r)^(−n)], where r is the periodic interest rate (annual rate divided by the number of payments per year) and n is the total number of payments.
The implied interest rate is not always quoted directly — an annuity provider may simply give you a payment amount for a given premium. You can reverse-engineer the implied rate with this calculator by adjusting the rate until the shown payment matches your quote. The higher the rate, the larger each payment.
This model covers a period-certain (fixed-term) annuity only. Life annuities, which pay until death, additionally depend on actuarial mortality tables and are highly insurer-specific — a life-annuity quote from an insurer will factor in your age, health, and the insurer's assumptions; this calculator cannot model that. The payback period shown is the point at which your cumulative receipts equal the original premium.
Frequently asked questions
An immediate annuity starts paying out almost right away — typically within 30 days of your lump-sum payment. A deferred annuity accumulates value over an accumulation phase (months or years) before converting to an income stream. Immediate annuities are commonly used by retirees who want to convert a lump sum (such as a pension commutation or inherited funds) into a steady income.
Use the rate implied by your annuity provider's quote. You can find it by entering the premium and term and adjusting the rate until the calculated payment matches the one you were quoted. If you are shopping for an annuity, use current market rates (often tied to government bond yields) as a benchmark — insurance companies typically offer slightly less than the raw bond yield after their fees and profit margins.
No. The payment is fixed in nominal terms, meaning inflation erodes its real purchasing power over time. Some annuity products offer cost-of-living adjustments (COLA riders) that increase payments annually by a set percentage; these would reduce the initial payment size in exchange for protection against inflation. This calculator does not model inflation-linked annuities.
Also known as
TG we-Calculate Editorial Team. (2026). Immediate Annuity Calculator — Fixed Payout from Lump Sum [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/immediate-annuity-calculator
TG we-Calculate Editorial Team. "Immediate Annuity Calculator — Fixed Payout from Lump Sum." TG we-Calculate. 2026. https://we-calculate.com/calculator/immediate-annuity-calculator.
TG we-Calculate Editorial Team, "Immediate Annuity Calculator — Fixed Payout from Lump Sum," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/immediate-annuity-calculator
@misc{wecalculate_immediate_annuity_calculator, title = {Immediate Annuity Calculator — Fixed Payout from Lump Sum}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/immediate-annuity-calculator}}, year = {2026}, note = {TG we-Calculate} }
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