This immediate annuity calculator is a great starting point to estimate monthly income on fixed or lifetime annuities. for more accurate payout rates and current quotes, see our Immediate Annuity Quote page.
An immediate annuity pays out earnings on a monthly basis. There are also deferred immediate annuities that allow you to accumulate and increase your payout rates for several years before they start paying monthly. Rates on these deferred annuities vary so call for a quote.
There are also deferred annuities that defer for a period of time then pay income starting at a later age. Learn more about these highly effective deferred income annuities.
How This Immediate Annuity Calculator Works
Immediate annuities pay periodic payments rather than accumulating a large balance. The size of these payments is determined by the duration of payments, which can be a specific # of years or lifetime, the frequency of payments, your principal investment, and the rate of return specified in the contract.
After defining these factors and deciding if you want an inflation protection (usually an increasing payment stream), this calculator will determine a periodic payout until the contract term is over and your balance is left empty. of course, the real benefit of an Immediate Annuity is that it typically pays for life. You can enter your life expectancy, but then slide the payout over more years to see how it performs if you live longer or shorter.
This calculator shows two data sets: 1) Annuity Balance, and 2) Total Payout.
The overall balance left in your account at the end of each year is shown in orange. For immediate annuities, this balance reaches zero at the end of the term. The total paid out to you up to any given year is shown in green. This graph is always linear because the periodic payments are kept constant.
Further Immediate Annuity Calculator Instructions
Investment — The lump-sum amount invested up front in the fixed immediate annuity. Also known as the premium.
Payment Frequency — The payout structure specified in the annuity contract. “Monthly” is the typical payout term, but some contracts pay out yearly or quarterly.
Contract Term — Number of years the annuity contract will last. At the end of this term your initial investment + interest gets paid out completely, resulting in a zero balance, ending the annuity contract. Longer contract terms result in lower monthly payouts.
Expected Return — The % interest rate anticipated for the given contract term. In the case of fixed immediate annuities, this return is often guaranteed and specified in the contract.
Checkboxes: Inflation Adjustment — Check this box to adjust payout calculations for inflation. Enter an average expected inflation rate for the duration of the contract. 3% is realistic.
Conclusions The contract term greatly affects payouts. Doubling from 5 to 10 years reduces monthly payouts by nearly half. Because immediate annuities don’t accumulate interest, their tax-deferral benefits are greatly reduced.
Deferred annuities are preferable for growth, immediate annuities preferable for retirement income. Keep in mind that the above calculations are simply estimates. For an actual rate quote see the Immediate Annuity Quote page.