An immediate annuity converts a lump sum into income starting right away. Life annuities from insurers also pool longevity risk, so they pay more than this period-certain estimate for older buyers – but your money is locked in.
How to use the Immediate Annuity Calculator
- Amount invested (premium)
- Payout frequency
- Payouts made at
- Payout period
- Annual rate of return
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the amount invested, the payout frequency and timing, the payout period and the rate of return.
Tips
- Start early – time does more of the work than the amount you save.
- Take the full employer match if your plan offers one.
- Plan with a cautious return (4–6% after inflation) and check again every year.
- Know the contribution limits and required minimum distribution rules for your accounts.
Common mistakes to avoid
- Ignoring inflation when setting a retirement target.
- Underestimating how long retirement can last.
- Withdrawing early and paying penalties and taxes.
Inputs explained
| Field | What to enter |
|---|---|
| Amount invested (premium) | Amount in your currency |
| Payout frequency | Choose one: Monthly, Semi-monthly, Bi-weekly, Weekly … |
| Payouts made at | Choose one: End of each period, Beginning of each period |
| Payout period | Units: years, months |
| Annual rate of return | In % |
What each result means
- Number of payouts = round([Payout period]×[Payout frequency])
- Payout per period = pmt([Rate per period], [Number of payouts], [Amount invested (premium)], 0, [Payouts made at])
- Total payout = [Payout per period]×[Number of payouts]
- Interest earned = [Total payout] – [Amount invested (premium)]
- Yearly payout as a share of the premium = [Payout per period]×[Payout frequency]÷[Amount invested (premium)]×100
Example values
How the main result changes when Amount invested changes and everything else stays at the example values above:
| Amount invested (premium) | Payout per period |
|---|---|
| 100,000 | 659.96 |
| 150,000 | 989.93 |
| 200,000 | 1,319.91 |
| 250,000 | 1,649.89 |
| 300,000 | 1,979.87 |
| 400,000 | 2,639.82 |
Formula
Payment = premium × i ÷ ((1 − (1 + i)^−n)(1 + i × timing)), i = rate per payment periodTotal payout = payment × nWorked example
Inputs — Amount invested (premium): $200,000; Payout frequency: Monthly; Payouts made at: End of each period; Payout period: 20 years; Annual rate of return: 5 %.
Results — Number of payouts = 240; Payout per period = $1,319.91; Total payout = $316,778.75; Interest earned = $116,778.75; Yearly payout as a share of the premium = 7.92 %.
Frequently asked questions
What is an immediate annuity?
An insurance contract that starts paying income within a year of purchase.
What is a SPIA?
A single premium immediate annuity – the most common type.
Can I get my money back?
Usually not after the free-look period; some contracts offer refund options.
What formula does the Immediate Annuity Calculator use?
Payment = premium × i ÷ ((1 − (1 + i)^−n)(1 + i × timing)), i = rate per payment period.