Deferred Annuity Calculator

Use this calculator to determine a final balance for fixed and variable deferred annuities. Deferred annuities accumulate earnings over time, allowing them to grow tax-free. Not investing in deferred annuities? See our Immediate Annuity Calculator.

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*Results shown are estimates only and should not be confused with actual product performance.
We make no guarantees that results on this page correlate to actual products.

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About

The above calculator is good for estimating final balances for fixed or variable deferred annuities. Most variable annuities are deferred, accumulating yearly earnings for future withdrawals. Fixed annuities can also be deferred, but are commonly immediate, paying earnings on a monthly basis. For immediate annuity calculations, click here.

How This Calculator Works

Deferred annuities accumulate interest over time, compounding the balance year after year until the contract ends and the funds are withdrawal or rolled over. This calculator determines a final account balance based on the initial investment, additional yearly contributions, the contract term, and an average expected rate of return. Other factors such as tax or inflation adjustment can also be specified.

This calculator graphs two data sets: 1) Annuity Account, and 2) Taxable Account. Your annuity balance is shown in orange. The taxable account, shown in green, serves as reference, making it easier to see how tax-deferral behaves over various time spans. When the taxable adjustment option is unchecked the annuity account and taxable account merge.

For more information on how variable annuities work, see Variable Annuity Guide.

Instructions

Fields

Initial Investment — The amount you are investing up front in the deferred annuity. Also known as the premium.

Annual Contribution — The amount you will be contributing to the deferred annuity on a yearly basis. This field is optional. Most variable annuities are flexible-premium, allowing further future investments. Most fixed annuities are single-premium, in which case this field should be left at zero.

Contract Term — Number of years the annuity contract will last. To simplify calculations we assume a 100% withdrawal of the total balance at the end of this term. In reality, most annuity investors will choose to renew the contract, rollover into a new product, or withdrawal gradually to avoid paying taxes.

Expected Return — The % interest rate anticipated for the given contract term. In the case of fixed deferred annuities, this return is often guaranteed and readily known. With variable annuities, you must estimate an average rate of return. Be realistic.

Checkboxes

Surrender Charges — Most deferred annuities feature a surrender schedule. Enter the contract's surrender charges in the pop-up box to see how your balance will be affected should you need to withdrawal prematurely. With proper investment offsets from surrender charges are rarely incurred.

Tax Adjustment — Check this box to calculate a final balance minus taxes. When checked, you will see two graphs, one of your annuity account and the other of a taxable account such as a CD, mutual fund, or money market. The dip in the final year of your annuity account is the result of an assumed 100% withdrawal at the retirement tax bracket indicated in the pop-up.

Inflation Adjustment — Check this box to adjust balance calculations for inflation. Enter an average expected inflation rate for the duration of the contract. 3% is realistic.

Conclusions

  1. The tax-deferral advantage of annuities increases with longer contract terms. At 20+ years the savings become very significant.
  2. Over long stretches of time (10+ years) inflation — even at 2% — will eat away over half of your account's buying potential.
  3. Graphed surrender charges deplete your balance only if you liquidate the account during the time these charges are in effect (typically 3-6 years), hence dips in the graph.
  4. The final year of a deferred annuity graph dips when assuming 100% liquidation at the of the term. This is the result of the back-loaded nature of annuity taxation. Compare this to an account that gets taxes little-by-little every year.
  5. Higher rates of return accentuate the tax-deferral benefits of annuities, making deferred annuities with high yields (5-10%) very attractive. Compare the difference between an annuity and taxable account at 4% and 10%.
  6. A solid retirement savings can be built up with relatively little up-front investment given long enough terms, so start saving early. A 35 year-old investor can turn $50,000 into $250,000 by the time he or she retires.

Keep in mind that the above calculations are merely estimates. For an actual rate report of the most competitive annuities in today's market, contact a licensed specialist. Request a FREE Report.