Annuity Income Payout vs Invest & Withdraw Calculator

This Annuity Income Payout vs Invest & Withdraw Calculator allows you to compare two retirement income strategies: buying a guaranteed annuity vs. investing your lump-sum and withdrawing income over time. By modeling both options side-by-side, you can evaluate which approach may provide greater longevity and flexibility for your retirement savings.

Instructions for Using the Annuity Income Payout vs Invest & Withdraw Calculator

Step 1: Choose Your Input Mode

You have two options. Pick whichever fits how you’re thinking about retirement income.

Option A: Lump-Sum Investment

• Use this if you already know how much capital you’re putting in.
• Default is set to 1,000,000 — adjust as needed.

Option B: Target Monthly Income

• Use this if you’re aiming for a specific income stream instead.
• Default is 5,000 per month.
• The calculator will work backwards to estimate the lump sum (premium) required.

Step 2: Enter Your Personal Details

These inputs will affect how the calculator simulates annuity and portfolio outcomes.

Your Age

• Default is 65. Change if needed.
• This impacts the annuity factor (i.e. how long your income might need to last).

Payout Option
Choose one of the following:

• Lifetime Only: highest income, but stops when you do.
• Joint Life: continues payments to your spouse after your death.
• Life with Period Certain (10 or 20 years): guarantees at least a minimum term of payments, even if you pass early.

Step 3: Set Your Investment Assumption

This is only used for the self-managed portfolio scenario.

• Expected Annual Investment Return
  • Enter as a percentage. Default is 6%.
  • Used to simulate how your investment might grow over time before withdrawals start.

Step 4: Click “Compare Results”

The calculator will now run both strategies side-by-side.

Scenario 1: Annuity

• Shows the monthly income you’ll receive.
• Tells you the premium required (if you chose income first) or calculates the income stream (if you input lump sum).

Scenario 2: Invest & Withdraw

• Assumes you invest the same amount in a portfolio earning your assumed return.
• You withdraw the exact same monthly income as the annuity.
• Withdrawals are made once per year.

Step 5: Read the Outputs

Chart View:

• Tracks your remaining capital at 5-year intervals (age 70, 75, 80… all the way to 115+).
• If the bars drop to zero, that’s when your portfolio runs out.

Table View:

• Shows the same data numerically — ending balance by age.

Summary

Use the results to understand trade-offs:

• Annuity gives you guaranteed income, but no liquidity or upside.
• Portfolio gives you control and potential growth, but with risk of depletion.

For more tailored advice (taxes, health, actual market risk), best to talk with a financial planner.

Free newsletters

High quality resources for 401k, 403b, 529 retirement plans on investment, contribution, fees, retirement planning and much more ...

Looking for a (forgotten) 401(k)?

Find plan contact info, plan expenses, investment options, rollover your old plan, or learn how to select investments on your 401k plan ...

Search