What Is a Deferred Income Annuity?
A deferred income annuity lets you convert a lump-sum payment now into a guaranteed, steady stream of income for the future. You give an insurance company a sum of money today, and in return, they promise to pay you a fixed amount later in life, typically starting when you retire.
Calculate Your Future Annuity Payments
See how a single premium can become a steady, guaranteed income stream for retirement. Our Deferred Income Annuity Calculator estimates your potential monthly annuity payments based on your premium, current age, and when you want payments to start.
To get started, complete the following information:
How I Want to Calculate Lifetime Income: Select an option for calculation.
- Amount I Contribute: Calculates the estimated monthly payment based on the total dollar amount you intend to contribute to the annuity.
- Amount I Receive Each Month: Calculates the deposit required to attain your targeted monthly income payout. Amount: Input the amount in dollars for your selected calculation.
Start Date: Enter the date when you want your payment to start. Must be at least 13 months and no more than 40 years from the illustration's effective date.
Funding Source: Select the funding type for the annuity.
- Qualified refers to funds from accounts, such as retirement savings plans, that receive special tax treatment under IRS rules with contributions made using pre-tax dollars.
- Nonqualified refers to funds from regular savings or investments with already paid taxes, not from a tax-advantaged retirement account.
- QLAC stands for Qualified Longevity Annuity Contract. A deferred income annuity purchased within a retirement account that is excluded from the balance used to calculate Required Minimum Distributions (RMDs). This exclusion lowers the owner's annual RMD from the remaining account, reducing their immediate tax bill and allowing the QLAC funds to continue growing tax-deferred.
Age: Enter the age at which you intend to buy the income annuity.
Gender: Select Male or Female.
State: Select your state of residence.
Add guaranteed income for an additional person: Select to include a joint annuitant in your estimate.
Relationship: Choose the relationship type with the additional person: spouse, family, or other.
Age: Enter the individual's age at the time of buying the income annuity.
Gender: Select Male or Female.
Click Calculate to produce your estimate.
Understanding Your Annuity Calculator Results
Based upon the selected calculation, the results display either:
1) Your estimated guaranteed monthly payout based upon your contribution amount.
or
2) Your estimated single premium required to achieve the desired monthly payout.
Note: Keep in mind that these amounts will vary based on the additional inputs.
The calculation is based on the Life with Cash Refund payout option, starting on the date you entered.
The chart at the bottom represents the Single Premium contributed and the Total Lifetime Annuity Income Estimate over select periods of 10 years, 20 years, and 30 years.
Considerations To Keep In Mind
When calculating a deferred annuity payout, here are the key considerations:
Accumulation Phase Factors
Initial Premium and Contributions: The amount you invest upfront or contribute over time directly impacts the eventual payout. Larger contributions mean larger payouts.
Accumulation Period Length: The age at which you purchase the annuity significantly impacts its outcome. The longer the deferral period before payouts begin, the more time for growth, which increases the eventual payout amount.
Interest Rate/Growth Rate: The credited interest rate or investment returns during the accumulation phase significantly affect the account value that will fund your payouts.
Fees and Expenses: Administrative fees, mortality and expense charges, and investment management fees reduce the accumulating value.
Payout Phase Factors
Age at Annuitization: Starting payouts at an older age results in higher periodic payments since the insurance company expects to make payments over a shorter lifespan.
Payout Option Selected: Different options produce different payment amounts:
- Life annuity: Provides payments for as long as you live. Payments stop upon your death.
- Life annuity with period certain: Payments are made for a predetermined duration (such as 10 or 20 years). Should you pass away before the term concludes, the remaining amount is given to your beneficiaries.
- Joint and survivor annuity: Provides payments for the lifetimes of you and a designated beneficiary (e.g., a spouse). The payouts continue until both individuals have passed away.
- Life with Cash Refund: This is an annuity option where regular payments are made to the annuitant for their lifetime, and upon their death, any remaining balance of the initial premium (minus the total payments made) is refunded to a designated beneficiary. * Illustrated above.
Current Interest Rates: Prevailing interest rates at the time you annuitize affect payout calculations. Higher rates generally mean higher payouts.
Life Expectancy Tables: Insurance companies use mortality tables to estimate how long they'll need to make payments, which affects the payout amount.
Additional Considerations
Inflation Protection: Cost-of-living adjustments reduce initial payments but provide protection against inflation.
Tax Treatment: Part of each payment may be taxable income vs. return of principal, affecting net value.
Surrender Charges: If you withdraw your funds or surrender the contract during the deferral period, you may face significant surrender charges that reduce the available value.
Health and Longevity: Your health and expected longevity should influence your decision. If you have health concerns that may reduce your life expectancy, consider other retirement income strategies in addition to an immediate annuity.
Income Needs: Assess your overall retirement income stream needs and how a lifetime income annuity contract fits into your broader financial plan.
Company Financial Strength: Choose a company with strong ratings from major agencies to ensure its financial stability and ability to meet long-term payment obligations.
Calculating your deferred annuity payout involves considering multiple personal and financial factors. Understanding these considerations can help you make an informed decision that aligns with your retirement goals and helps provide the financial security you need.
Consider consulting with a financial advisor to tailor the annuity to your overall retirement plan.