Annuity Calculator
Price the income a lump sum buys — and answer the question the brochure avoids: how long you must live before the annuity has actually returned your own money.
Annuity Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- Results are a model, not a quotation — an institution's own figures govern.
- Every input is an assumption; change one and the answer changes with it.
- Rounding is applied only at the display layer, so totals may differ by a cent from a statement that rounds each line.
In short: A $500,000 premium at 5.25% over a 20-year payout provides $3,369.22 a month, or $40,430.65 a year — an 8.09% payout rate. But the premium is not recovered until month 149, twelve years and five months in, and dying at fifteen years forgoes $177,458.32 of remaining account value.
Formula
P = premium · i = monthly rate · n = payout months · d = deferral months. This is the annuity-certain formula: a life annuity additionally prices mortality.
Worked Example
- Find the monthly rate. 5.25% ÷ 12 = 0.4375%.
- Amortise the premium. $500,000 over 240 months = $3,369.22 a month.
- Express it as a payout rate. $40,430.65 ÷ $500,000 = 8.09% a year — far above the underlying 5.25%, because it returns capital as well as interest.
- Find the recovery point. $500,000 ÷ $3,369.22 = 149 payments, so 12 years 5 months.
- Test an early death. At fifteen years, $177,458.32 of account value remains unpaid.
Analyst's note. The 8.09% payout rate is the single most misleading figure in retail annuity marketing. It is not a return — most of it is your own capital coming back. The genuine return is the 5.25% assumed rate, and you do not break even on the principal until month 149. An annuity is longevity insurance, and like all insurance it pays off only in the scenario you are insuring against: living a long time.
Strengths & Limits Of This Model
Where this engine is strong
- Runs entirely in your browser — no figure you type is transmitted or stored.
- Shows the full working, so every number can be traced and challenged.
- Free, unmetered and free of affiliate incentives.
Where it stops
- Generalised assumptions cannot capture every individual circumstance.
- Jurisdiction-specific rules and mid-year changes may not be reflected.
- A model output is not a substitute for a professional review of your position.
Practical Use Cases
Deciding whether to annuitise at all
Compare the income against drawing down the same pot yourself. Here the annuity pays $1,702.55 a month more than a 4% withdrawal — but that money is irrevocably gone, with no residual value for your estate. Model the self-managed alternative with the Retirement Calculator.
Weighing a deferral option
Deferring ten years lifts the income from $3,369.22 to $5,689.01, a 68.9% increase, because the premium compounds untouched and then amortises over the same period. That is only worthwhile if you can fund the gap years, which the Savings Calculator can size.
Understanding what your heirs receive
A plain annuity-certain with no death benefit forfeits the remaining account value. Check your position at a realistic age and decide whether a guarantee period or a return-of-premium rider is worth its cost. Compare the estate outcome against the Investment Calculator.
Methodology & Editorial Standards
This engine models an annuity-certain: a fixed premium amortised over a defined number of payments at an assumed rate, which is the correct structure for period-certain contracts and a close proxy for the guaranteed portion of others. Genuine life annuities additionally price mortality, so their payout for a given premium reflects your age, sex and health, and the insurer's expense and profit loadings — real quotes will differ from this figure and should be obtained directly. The recovery point is computed on nominal cumulative payments against the premium, with no discounting, which is the conservative reading. Payments are level and before tax. The engine implements the standard published formula for this calculation. Inputs are validated for domain and sign before evaluation, and any undefined case returns an em-dash rather than a spurious value.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
Annuity Calculator — 20 Expert FAQs
20 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
How much income will my lump sum buy?
A $500,000 premium at 5.25% over twenty years provides $3,369.22 a month. The figure depends heavily on the rate and the term: a longer payout period spreads the same capital more thinly, and a higher assumed rate raises the income.
Why is the payout rate higher than the interest rate?
Because each payment returns capital as well as interest. The 8.09% payout rate on these figures is not an 8.09% return — the actual return is the 5.25% assumed rate. Confusing the two makes annuities look far more generous than they are.
How long before I get my own money back?
On these figures, 149 payments — twelve years and five months. Before that point you have received less in total than you handed over. That break-even is the single most useful number when weighing an annuity against your realistic life expectancy.
What happens if I die early?
With a plain annuity-certain and no death benefit, the remaining account value is forfeited: $177,458.32 at fifteen years here. Guarantee periods, joint-life structures and return-of-premium riders all address this, and all reduce the income.
Is an annuity better than managing the money myself?
It pays more income — $1,702.55 a month above a 4% drawdown here — in exchange for irreversibly giving up the capital. It is insurance against outliving your money, not an investment, and it should be judged on that basis.
Should I defer the start date?
Deferring ten years raises the income 68.9% on these figures, because the premium compounds untouched first. It only makes sense if you can fund those years from elsewhere, and it increases the risk of dying before the income begins.
Does inflation erode annuity income?
Severely, on a level annuity. The final payment of a twenty-year contract has the purchasing power of $1,865.46 in today's money at 3% inflation — barely half the first. Index-linked annuities solve this and start materially lower.
What is the difference between an annuity-certain and a life annuity?
An annuity-certain pays for a fixed number of years regardless of survival. A life annuity pays until death, however long that is, which is why it prices mortality and why quotes depend on your age and health. This engine models the former.
Are annuity payments taxable?
Generally the interest portion is taxable while the return-of-capital portion is not, with the split determined by an exclusion ratio. Annuities held inside retirement accounts are taxed under those accounts' rules instead. The figures here are before tax.
What rate should I assume?
Use the rate a real quote implies rather than a market yield, because insurer pricing includes expenses and profit. Obtain live quotes and work backwards: the rate that turns your premium into the quoted income is the true assumed rate.
Can I get my money back if I change my mind?
Usually not after any short free-look period. Surrender is often impossible on an immediate annuity and expensive on a deferred one. This irreversibility is the central risk and the reason never to annuitise money you might need as capital.
Should I annuitise all my savings?
Rarely. A common approach is annuitising enough to cover essential fixed costs, leaving the remainder invested for flexibility and inheritance. Full annuitisation maximises income and eliminates every other option.
What is a joint-life annuity?
One that continues paying, often at a reduced rate, to a surviving spouse. It costs income up front and protects the survivor, which is usually the right trade for couples with unequal life expectancies or unequal pension entitlements.
How safe is an annuity?
It depends on the insurer's solvency, backstopped in the US by state guaranty associations up to limited amounts that vary by state. Splitting a large premium across insurers is a reasonable way to stay within those limits.
Why do quotes differ so much between providers?
Insurers use different mortality assumptions, investment yields and expense loadings, and they compete unevenly across age bands. Differences of several per cent in income for identical premiums are routine, so always obtain multiple quotes.
Is this annuity calculator free to use?
Yes. It is free, requires no account, and has no usage limits. ApexConverter is funded by contextual advertising, never by selling user data.
Is my data sent to a server?
No. The engine runs as Vanilla JavaScript inside your browser under our Zero-Server Client-Side Execution model. Your figures are computed locally and are never transmitted, logged, or stored.
How accurate is this calculator?
It applies the standard closed-form formula in IEEE-754 double precision, rounding only at the display layer. The engine is reconciled against an independent reference implementation before release.
Does it work on mobile?
Yes. The interface is mobile-first with numeric keypad hints and is tested down to a 320-pixel viewport with no horizontal scrolling.
Can I use it offline?
Largely, yes. Because computation is client-side, the page continues to calculate without a network connection once it has loaded.