This annuity calculator from Calculator Bank helps you determine your annuity payments by calculating the payout amount based on your investment, interest rate, and time period.
Annuity Calculator Inputs Explained
Initial Investment
The initial investment is the total amount you plan to convert into an annuity. This principal serves as the foundation for all your future income streams and directly influences the size of your payments.
Larger initial investments naturally generate greater income, following a mostly proportional relationship. When you evaluate this figure, consider your available retirement assets, desired income level, and the portion of your portfolio you wish to allocate to guaranteed income versus keeping liquid for other needs or investment opportunities.
Current Age
Your age at the time of annuity purchase impacts both pricing and payout calculations. Insurance companies use mortality tables to determine how long they expect to make payments, with older purchasers generally receiving higher monthly payments due to shorter expected payout periods.
This annuity calculator uses your current age to estimate life expectancy and calculate appropriate payment amounts for lifetime income options. The age you enter helps determine the time value of money in the calculations and influences the balance between total return and monthly income.
Deferral Period
Available only when using the deferred annuity option, this setting allows you to specify how many years you wish to delay the start of your income payments. During this accumulation phase, your initial investment grows at the specified interest rate without distributions.
Longer deferral periods allow more time for compounding, potentially resulting in larger future payments. This feature is useful for those still working who want to secure future income rates today or for creating income ladders that begin at specific future dates, such as upon reaching retirement age.
Interest Rate
The annuity interest rate represents the annual growth rate applied to your investment during both the accumulation and distribution phases. This rate affects both the growth of your principal (particularly important for deferred annuities) and the calculation of your periodic payments.
Higher interest rates lead to larger payments but may be more difficult to find in the marketplace. The calculator uses this rate to determine how quickly your money grows and how rapidly it can be distributed while maintaining the payment schedule you’ve selected.
Payout Period
This selection determines the duration of your income stream and significantly affects payment amounts. Choosing “Life” bases payments on your statistical life expectancy, providing income that cannot be outlived but potentially resulting in fewer total payments if you pass away earlier than expected.
Fixed period options (10, 15, 20, 25, or 30 years) guarantee payments for the specified duration regardless of longevity, offering certainty in planning but lacking the lifetime protection of a life annuity. Shorter payout periods yield higher monthly payments but limit the total potential income duration.
Monthly and Annual Payout
These calculator results show the regular income you can expect from your annuity based on your selected parameters. The monthly figure represents your periodic income for budgeting purposes, while the annual amount offers a perspective on your yearly guaranteed income. These figures help you assess whether the annuity provides sufficient income to meet your needs and how it compares to alternative income sources.
Total Payouts to Life Expectancy
This projected figure estimates the sum of all payments you might receive through your expected longevity (or your selected fixed period). Comparing this total to your initial investment helps evaluate the annuity’s overall financial efficiency.
For lifetime annuities, this projection uses actuarial life expectancy based on your current age; actual results may vary depending on your actual lifespan. This perspective helps you understand the potential long-term value proposition of the annuity beyond just monthly cash flow.