Annuity Calculator

This annuity calculator projects the accumulation phase of an annuity: what a starting premium plus regular deposits grows to before any income starts. The figures loaded on this page put in $20,000 up front and $10,000 at the start of every year for 10 years at 6%, which ends at $175,533.38. Of that, $120,000 is money you paid in and $55,533.38 is growth, so the return makes up 31.6% of the final balance. The schedule underneath breaks it down year by year or month by month.

What this calculator does and does not do

It models the growth phase, not an insurance quote. Feed it a premium, a deposit schedule, a growth rate, and a term, and it compounds them. What it cannot tell you is the monthly income that balance will buy, because that number is set by the insurer using your age, your sex in most states, the payout option you pick, and interest rates on the day you sign. Two people holding an identical $175,533 can be quoted incomes that differ by hundreds of dollars a month.

The growth rate you enter also means different things by product. On a fixed annuity it is close to a contractual promise. On a variable annuity it is a guess about market returns, and the real figure will be lumpy and can be negative. On an indexed annuity it is a guess after caps and participation rates take their cut. Enter a rate net of fees if you want the honest version, because a 6% gross return with 2% of annual charges behaves like 4%.

What an annuity actually is

An annuity is a contract between you and an insurance company: you hand over money, and the insurer promises payments later, often for as long as you live. That last part is the whole point. A savings account cannot run out of the ability to pay you at 97; an insurer's lifetime payout can, and that is the risk you are transferring.

Three roles appear in the contract and they are not always the same person. The owner controls the policy, can withdraw, assign, or surrender it, and holds the cash value. The annuitant is the life the payments are measured against, so their age drives the pricing. The beneficiary receives whatever is left at death. Contracts also run in two phases: accumulation, when money goes in and grows tax-deferred, and the payout phase, which starts when you annuitize and convert the balance into income. Annuitizing is usually a one-way door.

The tax deferral is the feature most often cited. Nothing is taxed while the money compounds inside the contract, and unlike an IRA or a 401(k) there is no annual contribution limit on a non-qualified annuity, which is why they get sold to people who already max out those accounts. The 401(k) Calculator and the IRA Calculator cover the accounts to fill first.

Fixed annuities and MYGAs

A fixed annuity credits a rate the insurer declares, with a contractual floor it cannot go below. Traditional versions reset that rate every year above the guaranteed minimum, which means an attractive first-year rate can drop at the first renewal. Principal is protected as long as the insurer stays solvent, so these are bought mainly by people who want a predictable number rather than a large one.

Multi-year guaranteed annuities, or MYGAs, lock a single rate for a fixed term, usually three to ten years. They are the closest thing in the annuity world to a certificate of deposit, with three differences: interest compounds tax-deferred instead of being taxed each year, terms run longer, and the backing comes from an insurer and a state guaranty association rather than the FDIC. Rates track intermediate Treasury yields fairly closely. If you are weighing one against a bank product, the CD Calculator gives you the taxable comparison.

Most fixed contracts pay a level amount with no cost-of-living adjustment. At 3% inflation, a payment that never rises loses half its purchasing power in about 23 years, which matters a great deal if you annuitize at 65 and live to 90.

Variable annuities

A variable annuity puts your premium into subaccounts that work like mutual funds, so the value rises and falls with markets and the principal is not guaranteed. You choose the allocation across stock, bond, and money market options, and you carry the investment risk. Because they are securities, they come with a prospectus, and the fee disclosures are worth reading line by line.

These carry the heaviest costs in the category. A realistic stack is a mortality and expense charge of 0.40% to 1.75%, an administrative charge of 0.10% to 0.30%, underlying fund expenses of 0.50% to 1.00%, and an optional income rider at 0.50% to 1.50%. Add those up at 3.2% a year and a $175,533 balance pays $5,617 annually before it earns a cent. Over a 25-year holding period that is the difference between comfortable and disappointing, and it is why a plain brokerage account often wins for money you do not need guaranteed.

Indexed and buffer annuities

An indexed annuity credits interest tied to an index such as the S&P 500, with a floor of 0% in a losing year and a ceiling in a winning one. Legally it is a fixed annuity, and you are never invested in the index itself. Three levers do the limiting, and a contract can use more than one:

• Cap: the most you can be credited. With a 10% cap, an index year of +15% credits 10%.
• Participation rate: the share of the move you receive. At 60% participation, that same +15% credits 9%.
• Spread: a slice taken off the top. With a 2% spread, +15% credits 13%.

Dividends are almost always excluded from the index calculation, which quietly removes roughly two points a year from a broad US index. The insurer can also reset caps and participation rates at each contract anniversary, so the generous terms in year 1 are not a promise for year 8. That combination is why long-run returns on indexed products land nearer bond returns than stock returns.

Registered index-linked annuities, sold as buffer or structured annuities, sit between indexed and variable. Instead of a 0% floor you get a buffer, commonly 10% or 20%: the insurer absorbs losses up to that depth and you take everything past it. A 10% buffer against an index that falls 25% leaves you down 15%. In exchange the caps are far higher than on a traditional indexed annuity, and unlike those, you can lose money.

Immediate and deferred annuities

An immediate annuity, usually written as a SPIA, turns a lump sum into income that starts within a year, with no accumulation phase. Retirees buy them to cover fixed costs that must be paid whether or not markets cooperate. A deferred annuity does the opposite: it accumulates for years or decades first, which is what this calculator projects, and converts to income later.

Two variations are worth knowing. A deferred income annuity takes a premium now and starts payments at a chosen future date, often 10 or 20 years out, which buys far more income per dollar than a SPIA because the insurer holds the money longer and some buyers do not live to collect. A qualified longevity annuity contract, or QLAC, is a deferred income annuity held inside an IRA or 401(k): SECURE 2.0 set the limit at $200,000 indexed for inflation, and it reached $210,000 in 2025. Money in a QLAC is excluded from required minimum distribution calculations until payments begin, which can be as late as age 85.

How a lifetime payout is priced

Payout rates look generous until you notice that part of each payment is your own principal coming back. A $100,000 immediate annuity bought by a 65-year-old has recently quoted in the region of $600 to $650 a month for life, which is around 7% to 8% of the premium a year. That is not a 7% return. For the first several years it is mostly your capital being handed back, and the contract only starts to look like an investment if you outlive the actuarial table.

The extra income comes from mortality credits: buyers who die early subsidize buyers who live long. That is a genuinely valuable trade for someone whose main worry is running out of money at 95, and it is the one thing no fund or bond ladder can replicate. It also explains why payout options change the number so much. Life only pays the most and stops dead at your death. A ten-year period certain, a joint-and-survivor option, or a cash refund all pay less, because the insurer is on the hook for longer.

Before buying, price the alternative. Delaying Social Security from full retirement age to 70 adds about 8% a year to a benefit that is already inflation-adjusted and backed by the federal government, which is usually a better deal than the first slice of annuity income you would otherwise buy.

The fee stack

Annuity charges are quoted in basis points, where 100 basis points is 1%. What you pay depends heavily on the product:

• Commission: 1% to 3% on a simple immediate annuity, 4% to 7% on a typical variable contract, up to 10% on complex indexed products. You rarely see it as a line item, because it is paid out of the insurer's margin and recovered through the surrender schedule.
• Mortality and expense: 0.40% to 1.75% a year on variable contracts, covering the death benefit and the lifetime income promise.
• Administrative: 0.10% to 0.30% a year for statements and servicing.
• Fund expenses: whatever the subaccounts charge, usually 0.50% to 1.00%.
• Riders: 0.50% to 1.50% each for guaranteed income floors, annual increases of 1% to 5%, long-term care benefits, or an enhanced death benefit.

Fixed annuities and immediate annuities look cheaper because the cost is built into the rate you are quoted rather than deducted visibly. The right question is not how many fees appear on the statement but what net rate or net income you end up with against the alternatives. Ask the agent to put the total annual cost of the contract in writing as a single percentage, including every rider you are being sold, and then compare that one number across the quotes you gather.

Surrender charges and the free look

Surrender charges are what make an annuity illiquid. A typical schedule runs 5 to 9 years and declines by roughly a point a year, so an eight-year schedule might charge 8% in year 1, 7% in year 2, and so on to zero. Some run 15 years or longer. Most contracts allow a penalty-free withdrawal of about 10% of the value each year, which is the escape valve people forget they have. Cancel outside that allowance before 59 and a half and the IRS adds its own 10% penalty on the gains.

Every state requires a free-look period, usually 10 to 30 days from delivery, during which you can cancel and get your premium back with no surrender charge. If a contract arrives and the terms do not match what you were told, that window is the moment to act.

How annuities are taxed

Growth inside the contract is untaxed until it comes out, and then it is taxed as ordinary income rather than at capital gains rates. For a non-qualified annuity, that difference can cost a high earner more than 20 percentage points on gains that would have qualified for long-term treatment in a brokerage account.

Withdrawals from a non-qualified deferred annuity come out gains first, which is last in, first out. Put in $120,000, grow it to $175,533, and the first $55,533 you withdraw is fully taxable. Annuitize instead and the exclusion ratio applies: each payment splits into a tax-free return of your basis and a taxable share, until the basis runs out and the whole payment becomes taxable. Withdrawals before 59 and a half generally add a 10% federal penalty on the taxable part.

One detail rarely mentioned at the point of sale: annuities get no step-up in basis at death. Heirs who inherit appreciated shares receive them at market value with the gain wiped out, while heirs who inherit a non-qualified annuity owe ordinary income tax on every dollar of growth. If leaving money behind is a priority, that changes the arithmetic. If you simply want out of a bad contract, a 1035 exchange moves the cash value into a different annuity without triggering tax, though a fresh surrender schedule usually starts on the new one.

Rolling a 401(k) or IRA into an annuity

Qualified money can move into an annuity without tax, and the result is a qualified annuity funded entirely with pretax dollars, so every payment is taxable when it arrives. Use a direct trustee-to-trustee transfer whenever possible, because it sidesteps the traps in the 60-day indirect rollover: miss the deadline and the whole amount becomes taxable income, and IRA-to-IRA rollovers are limited to one in any 12-month period. Transfers are not taxable but still get reported on that year's return.

Remember that the annuity adds no tax advantage inside an IRA, since the account is already tax-deferred. The only reasons to do it are the guarantees: lifetime income, a death benefit, or a QLAC's ability to push part of your required minimum distributions out to age 85. Paying variable annuity fees inside an IRA for deferral you already have is the classic mistake. The Retirement Calculator and Roth IRA Calculator help work out which bucket the money should sit in first.

Where annuities fit

They earn their place for one specific job: converting a pile of savings into income you cannot outlive. Worth having when

• you have maxed out the 401(k) and IRA and want more tax deferral, since the annuity has no contribution cap;
• your fixed costs in retirement exceed Social Security and any pension, and you want that gap covered by a contract instead of a portfolio;
• you would rather have spending controlled by a monthly deposit than by willpower;
• longevity runs in your family, which makes the mortality credits work in your favor.

Worth avoiding when

• you may need the money inside the surrender period, since liquidity is exactly what you are giving up;
• you are comparing on headline returns, because a diversified portfolio has historically beaten annuity crediting rates by a wide margin;
• the contract is going inside an IRA purely for deferral you already have;
• the fee stack runs past 2% a year with no guarantee attached that you actually value.

Questions to ask before signing

Check the insurer first, because every guarantee in the contract depends on the company staying solvent. Look at financial strength ratings from AM Best, S&P, or Moody's, and know that state guaranty associations back annuities only up to a limit, commonly $250,000 of present value per person per insurer. Then ask for the surrender schedule in writing, the all-in annual cost including riders, the guaranteed minimum rate rather than the illustrated one, and whether caps and participation rates can be changed after issue. Finally, get an income quote from at least three insurers, because payouts on identical contracts routinely differ by 5% to 10%, and that gap compounds across a 25-year retirement.

Reading the charts and the schedule

The donut splits the ending balance into three parts: the starting principal, everything you added afterward, and the growth on top. On the loaded example the growth slice is 32%, and the longer the term, the larger that slice becomes. The stacked bars show the same three components year by year, so you can watch the growth band overtake the deposits.

The schedule below the charts lists every period with its addition, its return, and the closing balance, and the annual and monthly toggle switches the detail level. Note the timing setting on the input side. Depositing at the start of each period rather than the end gives every dollar an extra period of compounding, worth several thousand dollars over 10 years on the loaded figures. The Investment Calculator runs the same projection without the insurance wrapper if you want to compare the two side by side.