Annuity Cash Out Calculator
If you’re receiving regular annuity payments but considering a lump sum payout instead, you need to understand the true value of your remaining payments. Our Annuity Cash Out Calculator is a free tool that instantly estimates the present cash value of your annuity based on your payment schedule and discount rate.
This tool helps you decide whether it’s financially advantageous to sell your annuity for a lump sum today. Whether you’re evaluating offers from structured settlement buyers or just comparing long-term payment options, this calculator provides clarity and confidence in your financial planning.
What Does the Annuity Cash Out Calculator Do?
The Annuity Cash Out Calculator estimates the present value of your future annuity payments. This amount represents what those future payments are worth in today’s dollars, accounting for a discount rate (which represents interest, inflation, or opportunity cost).
This is especially useful if you’re considering:
- Selling your structured settlement or annuity
- Taking a lump sum instead of periodic pension payments
- Evaluating offers from annuity buyers
How to Use the Annuity Cash Out Calculator
Using the calculator is simple and requires just four pieces of information:
1. Periodic Payment Amount
Enter the amount you receive for each scheduled annuity payment. For example, if you receive $1,200 every month, enter 1200.
2. Number of Remaining Payments
How many future payments are left? For example, if you have 10 years of monthly payments left, enter 120 (12 payments × 10 years).
3. Discount Rate (% per year)
This represents the rate of return you could expect from alternative investments. Commonly, this is between 5% and 10% depending on market conditions.
4. Payments Per Year
How many payments do you receive annually? For monthly payments, enter 12. For quarterly payments, enter 4.
5. Click “Calculate”
Once you enter the information, press Calculate to see the cash-out value – the lump sum equivalent of your remaining annuity.
Example: Estimating Your Annuity’s Present Value
Let’s look at a real-world scenario:
- Payment Amount: $1,200
- Remaining Payments: 120 (10 years of monthly payments)
- Discount Rate: 6% annually
- Payments per Year: 12
The tool will calculate the present value using the formula for the present value of an ordinary annuity: PV=P×(1−(1+r)−n)/rPV = P \times \left(1 – (1 + r)^{-n}\right) / rPV=P×(1−(1+r)−n)/r
Where:
P= payment per period ($1,200)n= total number of payments (120)r= discount rate per period (6% / 12 = 0.005 or 0.5%)
Result:
Cash Out Value = ~$103,954.17
That means your future 10 years of monthly payments are worth $103,954.17 in today’s dollars, assuming a 6% annual discount rate.
Why This Tool Is Useful
✅ Evaluate Lump Sum Offers
If someone offers to buy your annuity for $80,000, and the calculator says it’s worth $104,000, you know you’d be taking a steep discount.
✅ Plan for Retirement
Compare the present value of a pension annuity to investment options that offer better returns or flexibility.
✅ Legal Settlements
People with structured settlements often get offers from buyers. This tool lets you estimate whether the lump sum is fair.
✅ Avoid Lowball Offers
Some annuity buyers may offer only 50–70% of the annuity’s present value. This calculator helps you negotiate smarter.
Frequently Asked Questions (FAQs)
1. What is the “discount rate”?
The discount rate reflects the time value of money — how much future payments are worth today. It’s based on expected investment returns or inflation.
2. Why is the cash-out value less than the total of future payments?
Because money today is worth more than the same amount in the future. You could invest today’s cash and earn interest.
3. What if I receive quarterly payments instead of monthly?
Change the “Payments Per Year” field to 4 for quarterly payments.
4. How accurate is this calculator?
It uses the industry-standard present value formula. However, it assumes fixed payments and rates. Actual offers may also include fees.
5. Can I use this for pensions?
Yes, if your pension offers fixed payments for a set duration, this calculator will give you a close approximation.
6. What if the number of payments is uncertain?
For lifetime annuities or pensions, you’d need to use actuarial estimates. This tool is best for fixed-term annuities.
7. Can this calculator help me decide to sell my annuity?
Absolutely. It gives you a benchmark so you can judge if a lump sum offer is fair or too low.
8. Is the discount rate the same as interest rate?
They are similar but used in different contexts. The discount rate is used for present value calculations; it often reflects expected investment return.
9. What if I’m unsure of the right discount rate to use?
A good rule of thumb is 5–8%, based on average long-term investment returns. Try multiple values to compare.
10. Does this tool account for inflation?
Not directly. However, the discount rate can incorporate expected inflation. A higher rate assumes higher inflation.
11. What types of annuities does this work for?
Fixed annuities, structured settlements, and any payment stream with fixed periodic payments.
12. Can I use this for social security or variable annuities?
Not accurately. Those have variable payment amounts and durations. This calculator is for fixed, known schedules.
13. What’s a good discount rate for evaluating structured settlement offers?
Most financial analysts use 6–10%, but it depends on the economic climate and your risk tolerance.
14. Are lump sum offers usually below present value?
Yes. Buyers profit by offering less than the present value. Use this calculator to avoid undervaluing your annuity.
15. How can I get the most from my annuity?
Know your numbers, shop around, and negotiate based on your annuity’s true present value.
16. Is this the same as calculating net present value (NPV)?
Yes, for an annuity with equal periodic payments, this tool calculates NPV — the value today of future cash flows.
17. Can I use this for loan amortization?
No, this calculator doesn’t account for interest compounding in debt scenarios. It’s for annuity valuation only.
18. Why is the cash-out value higher with a lower discount rate?
Lower discount rates mean future payments are more valuable in today’s dollars.
19. What if my annuity payments increase over time?
This calculator does not support growing annuities. It assumes a fixed payment amount.
20. Is there a mobile version of this tool?
Yes, the tool is fully responsive and works on desktops, tablets, and smartphones.
Final Thoughts
Annuities and structured settlements can provide financial security, but sometimes a lump sum payout makes more sense. Before making that decision, use our Annuity Cash Out Calculator to understand what your annuity is really worth — in today’s dollars.
Armed with that knowledge, you can negotiate smarter, plan better, and protect your financial future.
👉 Try the calculator now and take control of your annuity decisions.