Annuity Calculator

Using this calculator's default assumptions (a fixed annuity credited at 5%, paying from age 65 to a planning horizon of 85), $200,000 produces about $1,320 a month, or roughly $15,800 a year. That works out to a 7.9% payout rate. Real quotes vary with your age, current interest rates, the insurer's mortality pricing, and any riders, so use this as a baseline and compare actual quotes from several insurers.

A single premium immediate annuity is the simplest version: you hand the insurer a lump sum and income payments start right away, usually within a month. To model one here, set the payout start age to your current age. Deferred annuities work the same way but grow for years before payments begin, which the Growth mode projects.

A fixed annuity credits a guaranteed interest rate, so payments are predictable. A variable annuity invests your money in market subaccounts, so the value and payments move with the market and fees run higher. An indexed annuity credits interest tied to a market index with caps on the upside and floors on the downside. Fixed is the easiest to estimate; for variable and indexed, this calculator's result is an average-case estimate rather than a guarantee.

Payout rates for lifetime income at age 65 commonly land in the 7% to 8% range, and they rise with age because the insurer expects to make payments over fewer years. A 75-year-old will be quoted a noticeably higher rate than a 60-year-old for the same premium. Rates also track prevailing interest rates, so quotes change over time.

No, and this is the most common annuity misunderstanding. A 7.9% payout rate does not mean you're earning 7.9%. Each payment is partly interest and partly your own principal coming back to you. That's why the break-even age matters: it shows when cumulative payments finally exceed what you paid in, which in this calculator's default case is around age 78.

Variable annuities often carry 1% to 3% in combined annual charges: mortality and expense fees, administrative fees, fund expenses, and optional rider costs. Most deferred annuities also impose surrender charges if you withdraw early, commonly starting around 7% and declining to zero over six to eight years. Simple immediate annuities have no visible annual fee; their cost is built into the payout rate. Always ask for the fee table and surrender schedule in writing before buying.

It depends on the money you bought it with. If the annuity sits inside a pre-tax account like a traditional IRA, every payment is ordinary income. If you bought it with after-tax dollars, part of each payment is a tax-free return of your own principal and part is taxable interest, split by an exclusion ratio the insurer calculates. Withdrawing gains before age 59½ can also trigger a 10% IRS penalty. This is educational information, not tax advice; a tax professional can apply the rules to your situation.

An annuity is longevity insurance: it converts a lump sum into income you cannot outlive, which no withdrawal strategy can fully promise. It tends to make sense for covering essential expenses that Social Security and any pension don't already meet, especially for people worried about outliving their savings. It tends not to make sense for money you want to leave to heirs or keep flexible, since annuitized dollars are usually gone from your estate. Many planners split the difference: annuitize enough to cover the basics, invest the rest.