How to Calculate Monthly Annuity Payments

by Eric Bank ; Updated July 27, 2017
Annuity calculators require only a few inputs.

An annuity is a stream of payments that last for a defined number of years or for the rest or your life. You buy an annuity by paying one or more premiums to an insurance company. The cash value of an annuity on its annuity date -- the date it begins paying out -- consists of your premiums plus any interest on those payments minus fees and the cost of insurance. You could use a complicated mathematical formula to calculate the monthly income from the annuity, but annuity payment calculators are readily available on the Internet.

Using an Annuity Calculator

You can use an annuity calculator for a fixed annuity, which is one that pays the same amount each month and is based on a set interest rate. To use the calculator, you enter the cash value, also called the present value, the monthly interest rate and the number of months in the annuity. For example, if you have a 6 percent, 30-year fixed annuity with a cash value of $200,000, you begin by dividing the annual interest rate by 12 and multiplying the number of years by 12. In this example, you enter $200,000 for the present value, 0.5 percent (6 percent divided by 12) for the monthly interest rate and 360 months (30 years times 12 months per year) for the number of periods. The result is a monthly payment of $1,199.10. If you have a lifetime annuity, use your remaining life expectancy, available from Internal Revenue Service Publication 590.

About the Author

Based in Chicago, Eric Bank has been writing business-related articles since 1985, and science articles since 2010. His articles have appeared in "PC Magazine" and on numerous websites. He holds a B.S. in biology and an M.B.A. from New York University. He also holds an M.S. in finance from DePaul University.

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