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Annuity Calculator
Calculate how much income an annuity will provide in retirement based on your investment, interest rate, and payout period. We're building this calculator now — check back soon.
Calculate how much income an annuity will provide in retirement based on your investment, interest rate, and payout period. We're building this calculator now — check back soon.
An annuity is a financial product that pays out a fixed stream of income, typically used as part of a retirement strategy. This calculator helps you estimate either the future value of an annuity you're building or the periodic payout you'd receive from an existing balance. Whether you're evaluating a product offered by an insurance company or planning retirement withdrawals, this tool gives you a clear picture of what to expect.
You can compare scenarios: higher monthly contributions over fewer years versus smaller contributions over a longer term, or a lump-sum purchase versus periodic deposits. The calculator handles both ordinary annuities (payments at end of each period) and annuities due (payments at beginning), which produce different results due to compounding timing.
The calculator uses standard time-value-of-money formulas. For an ordinary annuity future value:
FV = PMT × [((1 + r)ⁿ − 1) / r]
Where PMT is the periodic payment, r is the interest rate per period, and n is total number of periods. For payout calculations (present value), the formula reverses to determine how much a stream of future payments is worth today.
A fixed annuity pays a guaranteed interest rate set by the insurer. A variable annuity ties returns to underlying investment subaccounts, meaning growth is not guaranteed. Fixed annuities are simpler to model; variable annuities require assumptions about expected returns and carry market risk.
During accumulation, your money grows tax-deferred. During distribution (annuitization), the insurer converts your balance into a payment stream. Once annuitized, you typically cannot access the lump sum — you receive only periodic payments for the agreed term or lifetime.
Most annuity contracts include a surrender period — typically 5 to 10 years — during which early withdrawal triggers a surrender charge, often starting at 7–10% and declining annually. This is in addition to IRS early withdrawal penalties if under age 59½.
For non-qualified annuities (purchased with after-tax dollars), only the earnings portion is taxable as ordinary income — principal is returned tax-free. For qualified annuities (in an IRA or 401k), the entire payment is taxable. Roth IRA annuities are tax-free in retirement if qualified distribution rules are met.
A 1035 exchange allows you to transfer funds from one annuity to another without triggering a taxable event. The transfer must go directly between insurance companies — you cannot receive the funds personally first.
It depends on age, payout option, and current interest rates. As a rough estimate using 2024 rates, a 65-year-old male purchasing a $100,000 SPIA with a life-only payout might receive approximately $550–$650 per month. Lower rates and survivor options reduce this amount.
In a fixed annuity, principal is protected subject to insurer solvency. In a variable annuity, subaccounts are invested in market securities and values can decrease. Some variable annuities offer optional guaranteed income benefits for an additional annual fee, protecting income even if account value drops.
Pair this with the Retirement Withdrawal Calculator to model sustainable drawdown rates, or use the Present Value Calculator to understand what a stream of annuity payments is worth today. The Social Security Calculator helps with another form of lifetime income, and the RMD Calculator is relevant if your annuity is held inside an IRA.