Interactive demonstration of annuities and perpetuities financial modelling
The same $100,000 can last 15 years or forever
An annuity depletes your principal with each payment. A perpetuity never touches it—you only ever spend the interest, so the principal lasts infinitely. Same money, wildly different timelines. Drag the slider to adjust annual withdrawal and watch what happens.
Financial ModelAnnuity • Depleting
Drag slider to change annual withdrawal amount
Withdrawal: $5,000/year • Years remaining: 20
Annual Withdrawal
$1,000$6,500$12,000
Years Until Depleted
20
Principal Status
Depleting
An annuity is exactly like a loan, but reversed. Instead of borrowing $100,000 and paying it back with interest, you invest $100,000 and draw payments until it's exhausted. Each withdrawal reduces the principal—the leftover earns interest, but eventually the balance hits zero. Annuities fund retirement: you convert a lump sum into a stream of income over a fixed period. The mathematics? Identical to loan amortisation, just flipped. You can also model growing annuities where you add to the principal periodically, extending the lifespan.
Know This
A perpetuity pays forever because you withdraw only the interest earned—the principal remains untouched—while an annuity depletes the principal with each payment until the balance reaches zero.