Variable annuities grow tax-deferred, but fees often total 2–3% a year, which can consume a large share of the growth over decades. Compare with maxing out 401(k)s and IRAs first.
How to use the Variable Annuity Calculator
- Starting balance
- Yearly contribution
- Years until withdrawal
- Assumed gross return
- Mortality and expense (M&E) fee
- Administrative fee
- Fund expense ratio
- Rider fees
- Income tax rate at withdrawal
- Fees of a low-cost alternative
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the starting balance, yearly contribution, years until withdrawal, the assumed gross return, each fee and your tax rate at withdrawal.
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 |
|---|---|
| Starting balance | Amount in your currency |
| Yearly contribution | Amount in your currency |
| Years until withdrawal | A number |
| Assumed gross return | In % |
| Mortality and expense (M&E) fee | In % |
| Administrative fee | In % |
| Fund expense ratio | In % |
| Rider fees | In % |
| Income tax rate at withdrawal | In % |
| Fees of a low-cost alternative | In % |
What each result means
- Total annual fees = [Mortality and expense (M&E) fee] + [Administrative fee] + [Fund expense ratio] + [Rider fees]
- Net annual return = [Assumed gross return] – [Total annual fees]
- Value before tax = fvc([Net annual return]÷100, [Years until withdrawal], [Starting balance], [Yearly contribution])
- Total contributions = [Starting balance] + [Yearly contribution]×[Years until withdrawal]
- Value after tax on gains = [Value before tax] – max([Value before tax] – [Total contributions], 0)×[Income tax rate at withdrawal]÷100
- Value with low-cost alternative fees (before tax) = fvc(([Assumed gross return] – [Fees of a low-cost alternative])÷100, [Years until withdrawal], [Starting balance], [Yearly contribution])
- Cost of the annuity fees = [Value with low-cost alternative fees (before tax)] – [Value before tax]
Example values
How the main result changes when Starting balance changes and everything else stays at the example values above:
| Starting balance | Value before tax |
|---|---|
| 50,000 | 271,586.14 |
| 75,000 | 330,171.5 |
| 100,000 | 388,756.86 |
| 125,000 | 447,342.21 |
| 150,000 | 505,927.57 |
| 200,000 | 623,098.28 |
Formula
Net return = gross return − total annual feesValue = B(1 + net)^n + contribution × ((1 + net)^n − 1) ÷ netAfter-tax value = value − (value − contributions) × tax rateWorked example
Inputs — Starting balance: $100,000; Yearly contribution: $5,000; Years until withdrawal: 20; Assumed gross return: 7 %; Mortality and expense (M&E) fee: 1.25 %; Administrative fee: 0.15 %; Fund expense ratio: 0.75 %; Rider fees: 0.5 %; Income tax rate at withdrawal: 22 %; Fees of a low-cost alternative: 0.1 %.
Results — Total annual fees = 2.65 %; Net annual return = 4.35 %; Value before tax = $388,756.86; Total contributions = $200,000.00; Value after tax on gains = $347,230.35; Value with low-cost alternative fees (before tax) = $582,552.33; Cost of the annuity fees = $193,795.47.
Frequently asked questions
What fees do variable annuities charge?
M&E, administrative, fund expenses and optional riders – often 2–3% a year in total.
Are variable annuities a good investment?
They can suit people who have maxed out other tax-advantaged accounts and want guarantees.
How are withdrawals taxed?
Gains are taxed as ordinary income; before 59½ a 10% penalty may apply.
What formula does the Variable Annuity Calculator use?
Net return = gross return − total annual fees.