Annuity Calculator
Immediate vs deferred annuity payouts from a lump sum.
Monthly payout (estimate)
$938
Annuity payouts vary widely by carrier and product. SPIA quotes are easy to compare; variable/indexed annuities add complexity. Always compare to bond ladder + 4% rule.
An annuity converts a lump sum of savings into a stream of income, often guaranteed for life. It is a way to turn a pile of money into a paycheck you cannot outlive.
There are two broad timing choices. An immediate annuity (a SPIA) starts paying almost right away, typically within a year. A deferred annuity grows for a set period first and begins payments later, which usually raises the eventual income.
How much you receive depends on your age, current interest rates, and the payout option you pick. This calculator estimates the monthly income a given lump sum can buy and shows how those choices change it.
How this calculator works
For an immediate annuity, the insurer converts your lump sum into payments based on your life expectancy and prevailing interest rates: each payment blends a return of your principal with interest, so older buyers and higher-rate environments get larger checks because the money is spread over fewer expected years. A rough way to see the relationship is payout = lump sum x annual payout rate; a 65-year-old might see a life-only rate that produces meaningfully more income than a 55-year-old from the same lump sum. A deferred annuity first grows the lump sum at a credited or market-linked rate for the deferral years, then annuitizes the larger balance, which is why waiting increases income. The payout option matters just as much: life-only pays the most but stops at death with nothing left; life-with-period-certain guarantees payments for a minimum number of years; and joint-life covers two people. Each layer of protection lowers the monthly amount.
What affects the number
- Age at purchase: older buyers get higher payouts because payments are expected over fewer years.
- Interest rates: annuity income rises when rates are high and falls when rates are low, since insurers price off current yields.
- Immediate vs deferred: deferring lets the balance grow first, generally producing larger payments when income starts.
- Payout option: life-only pays the most; period-certain and joint-life pay less but protect a beneficiary or spouse.
- Inflation protection: adding a cost-of-living rider lowers the starting payment in exchange for payments that rise over time.
- Insurer strength and fees: guarantees are only as good as the insurer, and variable or indexed annuities can carry fees that reduce net income.
Frequently asked questions
What is the difference between an immediate and a deferred annuity?
An immediate annuity, or SPIA, converts a lump sum into income that begins almost right away, usually within a year. A deferred annuity holds and grows the money for a chosen period first, then starts payments later. Because the balance compounds during the deferral, a deferred annuity generally produces a larger income when it finally pays out.
How much monthly income will my lump sum buy?
It depends mainly on your age, current interest rates, and the payout option. A given lump sum buys more monthly income for an older buyer and when rates are high, and less for a younger buyer choosing options with survivor or period-certain protection. Because insurer quotes vary, compare offers from several highly rated companies before deciding.
Which payout option should I choose?
Life-only pays the highest monthly amount but stops entirely when you die, so nothing goes to heirs. Life-with-period-certain guarantees payments for a set number of years even if you die early, and joint-and-survivor continues income to a spouse. Each added protection reduces the monthly check, so the choice is a trade-off between maximum income and security for others.
Do annuities protect against inflation?
Only if you add an inflation or cost-of-living rider, which most basic annuities do not include by default. A fixed annuity pays the same dollar amount for life, so inflation erodes its buying power over time. An inflation-adjusted annuity starts with a lower payment that grows each year, trading early income for long-term protection.
This calculator provides general estimates for educational purposes only and is not financial, tax, or investment advice. Your actual results depend on your specific situation, tax rules, market returns, and the current year's IRS limits.