How to Use Our Annuity Calculator
Our calculator estimates the monthly annuity payments you can receive from an immediate annuity. It allows you to calculate your lifetime income based on your initial premium, age and other factors. This information can help you make informed decisions about your financial future.
To get started, complete the following information:
My Information
How I Want to Calculate Lifetime Income - Select an option for calculation:
- Total Amount To Contribute: Estimates the monthly payment based on the dollar amount you wish to use to fund the annuity.
- Amount To Receive Per Month: Estimates the contribution needed to achieve your desired monthly income.
Amount: Enter the dollar amount for your chosen calculation.
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.
About Me
Age: Input the age at which you plan to purchase the income annuity.
Gender: Select Male or Female.
State: Choose your state of residence.
Joint Information
Check the box to add a joint annuitant to the estimate. The inputs will expand three additional questions about the individual.
Relationship: Select your relationship with the added individual: spouse, family or other.
Age: Input the individual's age when purchasing the income annuity.
Gender: Select Male or Female
Click Calculate to produce your estimate.
Understanding Your Results
The "My Results" section displays your estimated monthly payout depending on your selected option for calculation — either the total amount to contribute or the amount to receive per month. Keep in mind that these amounts will vary based on the annuity funding source (Qualified vs Nonqualified) and "About Me" details. If you add a joint annuitant, that will also impact the estimated calculation. Be sure to review the data you entered into the calculator and understand how each of the factors may impact your guaranteed income estimate.
The chart at the bottom of the section represents the total lifetime annuity income estimate for select over periods of: 10 years, 20 years and 30 years. Understanding this information can serve as a starting point to begin planning your income for life.
Considerations To Keep In Mind
When calculating an immediate annuity payout, it's essential to consider several critical factors to ensure it aligns with your financial needs and goals. Here are the key factors:
- Initial premium amount: The amount of money you invest in the annuity directly affects the size of your payouts. A larger initial premium typically results in higher periodic payments.
- Age and life expectancy: Your age at the time of annuity purchase plays a significant role. Generally, the older you are, the higher your payouts, as the insurance company expects to make payments over a shorter period. Life expectancy, which can be influenced by your health and lifestyle, is also factored into the calculation.
- Payout frequency: Decide how often you want to receive payments. Options typically include monthly, quarterly, semi-annual or annual payments. Monthly payments might help with regular expenses, but annual payments could benefit from compounding if invested elsewhere.
- Payout type: There are different types of payout options:
- Life annuity: Provides payments for as long as you live. Payments stop upon your death.
- Life annuity with period certain: Payments for a specific period of time (e.g., 10 or 20 years). If you die before this period ends, your beneficiaries receive the remaining payments.
- 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. This is illustrated above.
- Interest rates: The interest rate environment at the time of purchase affects your annuity payout. Higher interest rates generally lead to higher payouts, but immediate annuities purchased during low interest rates may result in lower payouts.
- Increasing payout option: Consider whether you want an annuity that includes increasing payout option to protect against inflation. While this option can result in lower initial payments, it helps maintain your purchasing power over time.
- Company financial strength: The financial stability of the insurance company issuing the annuity is crucial. Choose a company with strong ratings from major rating agencies to ensure its financial asset position and ability to meet their long-term payment obligations.
- Fees and charges: Be aware of any costs associated with the annuity, such as administrative fees or surrender charges. These can reduce the overall value of your contract and, consequently, your payouts.
- Tax implications: Understand the tax treatment of your annuity payouts. Payouts are taxable as ordinary income for qualified annuities (funded with pre-tax money). Only the earnings portion of the payout is taxable for nonqualified annuities (funded with after-tax money).
- Legacy considerations: If you want to leave money to your heirs, consider how your annuity choice impacts this.
- 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 goals. Ensure that the annuity provides sufficient income to cover your essential expenses, considering other sources of retirement income like Social Security or pensions.
Calculating an immediate 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 situation.