Calculator
This calculator estimates a fixed withdrawal amount from a balance over a fixed term.
What is a fixed term annuity?
A fixed term annuity is a payout plan that distributes money from an account over a set number of years. You start with a balance, the balance earns a stated rate of return, and you withdraw a fixed amount on a regular schedule (monthly, quarterly, annually, and so on) until the term ends.
In plain language: this tool answers the question, “How much can I withdraw each period so my balance lasts exactly N years?”
How this fixed term annuity calculator works
Inputs you provide
- Starting balance: The amount available to fund payments.
- Annual interest rate: Estimated return earned while funds remain invested.
- Term length: Number of years you want the money to last.
- Payments per year: Frequency of withdrawals.
- Payment timing: End of period (ordinary annuity) or beginning (annuity due).
Core formula
For an ordinary annuity, the periodic payment is:
PMT = PV × r / [1 − (1 + r)−n]
where PV is present value (starting balance), r is periodic interest rate, and n is total number of payments. If payments are made at the beginning of each period, the payment is adjusted downward because each withdrawal gets one less period of growth.
Quick interpretation guide
- Payment per period: Your fixed withdrawal amount.
- Total payouts: Payment × number of periods.
- Total interest earned: Total payouts minus starting balance.
- Schedule preview: Shows how the balance declines over time.
Why payment timing matters
If you withdraw at the end of each period, your full balance earns interest for that period before the withdrawal. If you withdraw at the beginning, less money remains invested during the period, so the fixed payment must usually be lower for the account to last the same number of years.
Practical use cases
Retirement income planning
Estimate sustainable income from a retirement bucket for a specific time horizon, such as age 65 to 85.
Bridge income
Plan withdrawals from savings until a pension or Social Security start date.
Education and trust distributions
Create predictable annual or monthly payments over a known timeline.
Common mistakes to avoid
- Using an overly optimistic return assumption.
- Ignoring taxes, fees, and inflation.
- Confusing nominal annual rate with effective annual rate.
- Not matching compounding assumptions to payment frequency.
Important limitations
This calculator provides a deterministic estimate. Real-world investment returns vary year to year, and inflation reduces purchasing power. Use this as a planning baseline, then stress test with lower return assumptions and shorter terms to build a margin of safety.
Frequently asked questions
Is this the same as an immediate annuity quote from an insurer?
Not exactly. This tool models a fixed-term payout mathematically. Insurance annuity quotes also include pricing factors such as mortality, insurer expenses, and contractual features.
What if the interest rate is 0%?
The payment is simply starting balance divided by number of payments.
Can I use decimal years?
Yes. The tool converts years and payment frequency into total periods.
Bottom line
A fixed term annuity calculator helps turn a lump sum into a clear payout plan. Start with realistic assumptions, test conservative scenarios, and revisit your plan regularly as rates, expenses, and goals change.