Annuity Calculator

An ordinary annuity makes each payment at the end of the period; an annuity due makes it at the beginning. In accumulation, an annuity due ends with a higher balance because every deposit earns one more period of interest. In payout, paying at the start lowers the level payment slightly: $250,000 at 5.5% over 20 years pays $1,719.72 a month at period end and $1,711.87 at period start.

By amortizing the principal over the term: PMT = PV × r / (1 − (1 + r)^−n), where PV is the starting principal, r the periodic rate (annual rate ÷ payments per year) and n the number of payments. For an annuity due, divide the result by (1 + r). $250,000 at 5.5% for 240 months gives $1,719.72 a month.

An immediate annuity (SPIA) starts paying income within a year of a single lump-sum premium. A deferred annuity first accumulates interest tax-deferred, often for 5 to 30 years, before you withdraw the money or annuitize it into a regular income stream. Use the Accumulation tab for the deferred phase and the Payout / drawdown tab for the income phase.

It depends on how the contract was funded. A qualified annuity bought with pre-tax money (an IRA or 401(k) rollover) is fully taxable as ordinary income when paid out. A non-qualified annuity bought with after-tax money is taxed only on its earnings: annuitized payments use the exclusion ratio to return principal tax-free, and withdrawals before annuitization are treated as earnings first (IRS Publications 575 and 939).

Yes. A life annuity pays for as long as you live, or as long as either of two people lives under a joint-life contract, and its amount comes from the insurer's mortality tables rather than a fixed number of years. This calculator models fixed-term (period certain) payouts; compare a lifetime quote with its fixed-term figure at a similar rate to see what the lifetime guarantee is worth.

A fixed annuity pays the same dollar amount every period, so inflation steadily erodes what it buys. At 3% a year, a $1,500 monthly payment buys what about $830 buys today after 20 years ($1,500 ÷ 1.03^20 = $830.50). Contracts with a cost-of-living adjustment start with a lower payment in exchange for the annual increase.

A surrender charge is a fee the insurer deducts if you cancel the contract or withdraw more than the penalty-free amount during the surrender period. The schedule is written into the contract, usually starting highest in the first year and declining to zero over several years, and many contracts allow a free withdrawal of part of the value each year. The SEC and FINRA investor guides recommend reading that schedule before buying.

For a fixed-term payout the answer is exact: $100,000 over 20 years at 5%, paid monthly at period end, gives $659.96 a month; at 4% it is $605.98, and over 25 years at 5% it is $584.59. A lifetime income annuity is priced by the insurer from your age, sex and current rates, so get quotes; an older buyer receives more, and joint-life or period-certain guarantees reduce the payment.

An annuity is better judged as insurance than as an investment. You buy a guaranteed stream of income and pay for it with lower liquidity, surrender charges in the early years, fees on variable and indexed contracts, and returns usually below a long-run stock portfolio. It suits someone who wants an income floor they cannot outlive; it suits less someone who needs access to the money or wants to leave it to heirs.

A CD is a bank deposit insured by the FDIC up to $250,000, with interest taxed each year and a modest early-withdrawal penalty. A fixed annuity is an insurance contract backed by the insurer and state guaranty associations, with interest tax-deferred until withdrawn, surrender charges in the early years, and a 10% additional federal tax on earnings taken before age 59½. An annuity can also be converted into lifetime income; a CD cannot.

It depends on the phase and the payout option. During accumulation, the contract value passes to the named beneficiary, avoiding probate but not income tax on the untaxed growth. Once payments start, a life-only annuity stops at death; a joint-life option continues to the survivor; a period-certain option pays the beneficiary for the rest of the guaranteed term; a cash-refund option returns any premium not yet paid out. Each guarantee lowers the payment.

Usually two. IRC §72(q) adds a 10% tax on the earnings portion of a withdrawal from a non-qualified annuity before age 59½, on top of ordinary income tax, unless an exception applies such as death, disability or substantially equal periodic payments; annuities inside an IRA or qualified plan follow those accounts' rules instead. The insurer may separately charge a surrender fee under the contract's schedule.