Calculate fixed, variable, and indexed annuity payouts with surrender charges, death benefit, and income rider projections.
Annuities convert a lump-sum premium into future income two ways: growth during a deferral period, then conversion of the resulting balance into level payments. This tool models both steps for fixed, variable, and indexed contracts, applies any surrender-charge schedule against early withdrawals, estimates the death benefit payable if the owner dies before annuitizing, and layers in optional income-rider guarantees. The detail most people miss: the payout it shows is the gross contract amount before ordinary income tax on the growth portion, so the number that lands in a bank account will be smaller than the figure displayed.
A concrete input and expected output from the current implementation.
Input
Premium: $100,000, Type: Fixed, Guaranteed rate: 3.5%, Deferral period: 10 years, Payout: 10-year period certain, annual payments
Expected output
Accumulated value after 10 years: $141,059.88. Annual payout: $16,961.23 for 10 years (total payments $169,612.30).
The $100,000 premium compounds annually at 3.5% for 10 years to $141,059.88 (100000 x 1.035^10), then that balance is annuitized into 10 equal end-of-year payments using the same 3.5% rate as the payout discount factor: $141,059.88 divided by a 10-year annuity factor of 8.3166.
During the deferral years, the premium grows using the crediting method chosen for the contract type: a stated compound rate for fixed, an assumed sub-account return for variable, or a simplified cap/participation-style rate for indexed. Any rider fee is subtracted from the crediting rate before compounding, since riders reduce the cash-value growth that funds the eventual annuitized payment.
At the end of deferral, the accumulated value is divided by a present-value annuity factor built from the payout rate and the chosen term (period-certain years or a life-expectancy-based factor for lifetime payouts) to produce a level periodic payment. Surrender charges are applied separately, only when a withdrawal occurs inside the surrender period rather than at scheduled annuitization.
No. The tool projects gross contract values and payments. Ordinary income tax on the growth (and a 10% early-withdrawal penalty before age 59.5, for non-qualified contracts) is not subtracted, so actual after-tax income will be lower than shown.
Only as a rough approximation. Real indexed products use carrier-specific, annually-reset caps, participation rates, and spreads; entering one assumed average rate will not reproduce the exact crediting outcome of a particular contract.
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