Annuity Payout Formula Explained, With Examples
Every annuity payout result comes from one formula. Once you understand what goes into it, you can sanity-check any figure you are given, whether by an employer, a bank, a teacher or another website.
The formula
Payout = P × r ÷ (1 − (1 + r)^−n).
What each input means
- Lump sum (S$): the value you enter in the calculator.
- Return (% a year): the value you enter in the calculator.
- Payout years: the value you enter in the calculator.
Example
For example, with these inputs:
- Lump sum (S$): 300,000
- Return (% a year): 4
- Payout years: 25
the calculator returns:
- Monthly payout: S$1,583.51
How the result changes
The table keeps the other inputs at their example values and changes lump sum (s$).
| Lump sum (S$) | Monthly payout |
|---|---|
| 300,000 | S$1,583.51 |
| 150,000 | S$791.76 |
| 225,000 | S$1,187.63 |
| 375,000 | S$1,979.39 |
| 450,000 | S$2,375.27 |
Why it matters
Interest rates, instalments and returns compound over years, so a small difference in rate or tenure turns into thousands of dollars. Working the numbers out yourself makes it easier to compare bank offers, avoid expensive debt and plan savings goals.
Compounding is the reason long-term saving works: returns earn further returns, so the growth curve steepens over time. The same maths works against you with debt, which is why credit card balances at around 27% a year grow quickly if only minimum payments are made.
Inflation erodes buying power, so a savings goal set in today's dollars needs to be adjusted upwards for the years it will take to reach it. Singapore's core inflation has varied widely over the past decade, so it is worth testing a range of rates.
Calculators make it easy to compare scenarios side by side: a shorter tenure versus a lower instalment, a higher deposit versus more cash in hand, or paying down debt versus investing. Seeing the total cost, not just the monthly figure, usually makes the better choice obvious.
Related calculations
- Inflation Calculator: Shows how inflation changes prices and purchasing power.
- Fixed Deposit Calculator: Calculates interest on a Singapore fixed deposit, which typically pays simple interest at maturity.
- Dividend Yield Calculator: Calculates dividend yield for SGX stocks and REITs.
- Break-Even Calculator: Finds how many units you must sell to cover costs.
Use the Annuity Payout Calculator to plug in your own numbers.
Run your own numbers: Annuity Payout Calculator