Transparent method
The formula
Worked example
Example inputs
How to interpret the result
An annuity in the accumulation phase grows like any savings plan, and the difference is in the contract terms. Starting with $50,000 and adding $1,000 a month at a 5 percent credited rate for 15 years reaches about $372,974. Contributions total $230,000, so credited growth is about $142,974. The credited rate is set by the contract and may change, and fees and surrender charges affect what you can actually take out.
Before you rely on it
What to check
Read the surrender schedule, the fees and how the crediting rate is set. Then compare the contract with a low-cost alternative for the same money.
The common error
Where people go wrong with annuity growth calculator
Treating the credited rate as guaranteed for the whole period. Many contracts guarantee a floor and let the current rate change.
Sensitivity evidence
How annual credited rate changes the estimated future annuity value
| Annual credited rate | Estimated future annuity value | Total contributions | Estimated credited growth |
|---|---|---|---|
| 3.0% | $305,344 | $230,000 | $75,344 |
| 4.0% | $337,106 | $230,000 | $107,106 |
| 5.0%worked example | $372,974 | $230,000 | $142,974 |
| 6.0% | $413,523 | $230,000 | $183,523 |
| 7.0% | $459,410 | $230,000 | $229,410 |
Every input, tested
Which input moves the estimated future annuity value most
| Input | Tested from | To | Estimated future annuity value at each end | Swing |
|---|---|---|---|---|
| Accumulation years | 11.0 years | 19.0 years | $262,069 to $508,377 | $246,308 (66%) |
| Annual credited rate | 4.0% | 6.0% | $337,106 to $413,523 | $76,418 (20%) |
| Monthly contribution | $900 | $1,100 | $346,245 to $399,703 | $53,458 (14%) |
| Starting annuity value | $45,000 | $55,000 | $362,406 to $383,543 | $21,137 (5.7%) |
Two variables at once
Estimated future annuity value by annual credited rate and starting annuity value
| Annual credited rate \ Starting annuity value | $40,000 | $50,000 | $60,000 |
|---|---|---|---|
| 3.0% | $289,670 | $305,344 | $321,019 |
| 4.0% | $318,903 | $337,106 | $355,309 |
| 5.0% | $351,837 | $372,974 | $394,111 |
| 6.0% | $388,982 | $413,523 | $438,064 |
| 7.0% | $430,920 | $459,410 | $487,899 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Starting annuity value | $50,000 |
| Monthly contribution | $1,000 |
| Annual credited rate | 5.0% |
| Accumulation years | 15.0 years |
| Estimated future annuity value | $372,974 |
| Total contributions | $230,000 |
| Estimated credited growth | $142,974 |
Complete evidence
Full projection schedule
Show all 15 rows
| Period | Opening balance | Contribution | Growth | Ending balance |
|---|---|---|---|---|
| Year 1 | $50,000 | $12,000 | $2,800 | $64,800 |
| Year 2 | $64,800 | $12,000 | $3,540 | $80,340 |
| Year 3 | $80,340 | $12,000 | $4,317 | $96,657 |
| Year 4 | $96,657 | $12,000 | $5,133 | $113,790 |
| Year 5 | $113,790 | $12,000 | $5,989 | $131,779 |
| Year 6 | $131,779 | $12,000 | $6,889 | $150,668 |
| Year 7 | $150,668 | $12,000 | $7,833 | $170,502 |
| Year 8 | $170,502 | $12,000 | $8,825 | $191,327 |
| Year 9 | $191,327 | $12,000 | $9,866 | $213,193 |
| Year 10 | $213,193 | $12,000 | $10,960 | $236,153 |
| Year 11 | $236,153 | $12,000 | $12,108 | $260,260 |
| Year 12 | $260,260 | $12,000 | $13,313 | $285,573 |
| Year 13 | $285,573 | $12,000 | $14,579 | $312,152 |
| Year 14 | $312,152 | $12,000 | $15,908 | $340,060 |
| Year 15 | $340,060 | $12,000 | $17,303 | $369,363 |
Where the inputs come from
Starting annuity value is the current contract balance, monthly contribution is what you add, and the annual credited rate is the rate the insurer credits, which for a fixed annuity is stated in the contract and for a variable one depends on the funds. Accumulation years is how long you will keep the contract before annuitizing or withdrawing. Check for surrender charges and fees, which reduce what you can actually take out.
When the result stops applying
Fixed annuity rates are often guaranteed only for an initial period, after which the insurer can reset them. Surrender charges commonly apply for several years and can reach 7% or more, and early withdrawals before 59½ may bring a 10% penalty. Variable annuities carry fees that can exceed 2% a year. The guarantees depend on the insurer's ability to pay.
What to compare it with
Convert the balance to income with the annuity payout and immediate annuity calculators, and value a stream with the annuity present value page. Compare with the IRA growth and retirement savings calculators. Read the contract for surrender schedules and the guaranteed minimum rate.
People also ask
Frequently asked questions
Are annuity earnings taxed?
They grow tax deferred, and withdrawals of earnings are taxed as ordinary income, not capital gains. In a non-qualified annuity, you get your original contributions back tax free.
What is a surrender charge?
A fee for withdrawing more than allowed during the early years of the contract, commonly declining each year, designed to protect the insurer's costs.
Is a fixed annuity safe?
It is backed by the insurance company, and state guaranty associations provide limited protection if the insurer fails, so check the insurer's financial ratings.