Annuity Calculator
Calculate annuity payouts, present value, and future value for retirement planning.
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What Is an Annuity?
An annuity is a financial product that provides regular payments over a set period (or for life) in exchange for a lump-sum investment. It's commonly used for retirement income planning.
Types of Annuities
- Fixed annuity — Guaranteed interest rate and payments. Predictable and safe.
- Variable annuity — Payments tied to investment performance. Higher potential, more risk.
- Immediate annuity — Payments start right after purchase.
- Deferred annuity — Payments start at a future date, allowing tax-deferred growth.
Is an Annuity Right for You?
- Pros — Guaranteed income, tax-deferred growth, protection from market downturns.
- Cons — High fees (2-3%+/year), limited liquidity, complex terms, inflation risk with fixed payouts.
When Annuities Make Sense
- You've maxed out 401(k) and IRA contributions
- You want guaranteed lifetime income
- You're worried about outliving your savings
When to Avoid
- You need liquidity and access to your money
- You have sufficient retirement income from other sources
- Fees outweigh the guaranteed income benefit
Frequently Asked Questions
How are annuity payments calculated?
Payments are based on the principal, interest rate, and payout period. The formula uses the present value of an annuity: PMT = PV × [r(1+r)^n] / [(1+r)^n - 1].
How much does a $500,000 annuity pay per month?
At a 5% annual rate over 20 years, approximately $3,300/month. Actual payouts vary based on your age, type of annuity, and the insurance company.
Are annuity payments taxable?
It depends. Qualified annuities (funded with pre-tax money) are fully taxable. Non-qualified annuities (after-tax money) are partially tax-free — only the earnings portion is taxed.
Disclaimer
This calculator is for educational and estimation purposes only. It does not constitute financial, tax, or investment advice. Results are estimates based on the inputs you provide and may not reflect your actual situation. Consult a qualified financial advisor, tax professional, or lender before making important financial decisions.