This calculator works out the level monthly payment that pays out a lump sum, with interest, over a set number of years (a term-certain annuity), or the lump sum needed for a target monthly income. A life annuity, which pays for as long as you live, is priced by the insurer from your age and life expectancy, so use a quote for that; the result here is a useful check on it. This page is part of the retirement income hub.
How the calculation works
The payment is the one that brings the balance to zero after the last month: payment = amount × r ÷ (1 − (1 + r)−n), where r is the yearly rate divided by 12 and n the number of monthly payments. “Cost” mode runs it backwards from the income you want.
$100,000 over 20 years at 4% a year: r = 0.04 ÷ 12 and n = 240, so the payment is $605.98 a month.Types of annuities
| Type | Pays |
|---|---|
| Life annuity | For as long as you live; a guarantee period keeps payments going to a beneficiary if you die early |
| Joint and last survivor | Until the second of two people dies, often at a reduced amount for the survivor |
| Term-certain | For a fixed number of years, whether or not you are alive |
| Indexed | Payments that rise each year, in exchange for a lower starting payment |
Registered money can buy an annuity directly: An RRSP must mature by December 31 of the year you turn 71: by then you convert it to a RRIF, buy an annuity, or withdraw it as taxable income (or combine these).
What sets a life annuity’s payout
- Age. The older you are when you buy, the fewer payments the insurer expects to make, so each one is larger.
- Life expectancy. At 65, Statistics Canada’s life table gives men 19.75 more years and women 22.45 (2024), so a woman of the same age usually gets a slightly lower payment.
- Interest rates. Payouts are priced from long-term interest rates when you buy, so higher rates mean higher payouts.
- Features. A guarantee period, a survivor benefit or indexing each lower the starting payment.
- The insurer. Quotes differ between companies, so comparing several is worthwhile.
How annuity payments are taxed
| Bought with | Tax on payments |
|---|---|
| RRSP, RRIF or pension money | Fully taxable as income |
| Non-registered savings | Only the interest portion is taxable; the return of your capital is not |
| Non-registered, prescribed annuity | The interest is spread evenly over the payments, so the taxable amount is the same each year |
If the insurer fails
Annuities from life insurance companies that are members of Assuris are protected if the insurer fails: you keep up to $5,000 a month or 90% of the promised monthly income, whichever is higher (Assuris, payout annuities).
Annuity or RRIF?
An annuity gives guaranteed income but gives up access to the money; a RRIF keeps the money invested and flexible, with the risk that it runs low. Annuity vs RRIF compares the two; you can also use part of your savings for each.
Related calculators
Sources
The figures and rules on this page come from these sources, last checked against them between September 25, 2026 and September 30, 2026. How we check facts.
- Canada Revenue Agency: RRSPs and Other Registered Plans for Retirement
- Canada Revenue Agency: How contributions affect your RRSP deduction limit
- Statistics Canada: Life expectancy and other elements of the complete life table, single-year estimates,…