Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A calculator's modeled payout and an actual insurer's quoted payout can differ meaningfully, because a real annuity price also reflects mortality pooling, guarantees and insurer expenses that a simplified amortization-style calculation doesn't include. The modeled number is a reasonable starting estimate, not a quote.
Before you rely on it
What to check
Get an actual quote from an insurer before treating any calculated payout figure as the real number available in the market.
The common error
Where people go wrong with immediate annuity calculator
Comparing a calculator's theoretical payout directly against an insurer's marketing materials as if they were quoting the same thing. Only an actual quote reflects the real pricing, mortality assumptions and fees involved.
Sensitivity evidence
How annual payout interest rate changes the estimated monthly payout
| Annual payout interest rate | Estimated monthly payout | Total modeled payouts | Modeled interest component |
|---|---|---|---|
| 2.0% | $2,024 | $485,648 | $85,648 |
| 3.0% | $2,218 | $532,414 | $132,414 |
| 4.0%worked example | $2,424 | $581,741 | $181,741 |
| 5.0% | $2,640 | $633,558 | $233,558 |
| 6.0% | $2,866 | $687,774 | $287,774 |
Every input, tested
Which input moves the estimated monthly payout most
| Input | Tested from | To | Estimated monthly payout at each end | Swing |
|---|---|---|---|---|
| Payout period | 15.0 years | 25.0 years | $2,959 to $2,111 | $847 (35%) |
| Amount annuitized | $360,000 | $440,000 | $2,182 to $2,666 | $485 (20%) |
| Annual payout interest rate | 3.0% | 5.0% | $2,218 to $2,640 | $421 (17%) |
Two variables at once
Estimated monthly payout by annual payout interest rate and amount annuitized
| Annual payout interest rate \ Amount annuitized | $320,000 | $400,000 | $480,000 |
|---|---|---|---|
| 2.0% | $1,619 | $2,024 | $2,428 |
| 3.0% | $1,775 | $2,218 | $2,662 |
| 4.0% | $1,939 | $2,424 | $2,909 |
| 5.0% | $2,112 | $2,640 | $3,168 |
| 6.0% | $2,293 | $2,866 | $3,439 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Amount annuitized | $400,000 |
| Annual payout interest rate | 4.0% |
| Payout period | 20.0 years |
| Estimated monthly payout | $2,424 |
| Total modeled payouts | $581,741 |
| Modeled interest component | $181,741 |
Where the inputs come from
Amount annuitized is the premium you would pay the insurer, the payout interest rate is the return built into the payments, and the payout period is the years of payments. Real immediate annuities are priced from your age, sex, the payout option and current interest rates, so treat this tool as a way to compare the shape of the payments and then get quotes from several insurers, using a quote tool or an agent who can shop the market.
When the result stops applying
The insurer's payment includes its own margin, and the actual rate depends on when you buy: higher interest rates raise payouts. Lifetime options pay more the older you are at purchase. Inflation reduces the value of level payments, and the insurer's solvency matters, so check ratings and state guaranty limits.
What to compare it with
The annuity payout calculator gives the same model with different framing, and the retirement income gap page shows whether guaranteed income fills your shortfall. Compare with delaying Social Security, which buys inflation-adjusted lifetime income more cheaply for many people. Get quotes from at least three highly rated insurers on the same day, since payouts for the same premium differ by several percent between companies.
People also ask
Frequently asked questions
How is an immediate annuity different from a deferred one?
An immediate annuity starts paying within about a year of purchase, while a deferred annuity accumulates for years first and pays later.
Can I get my money back after buying?
Generally not. Some contracts offer a cash refund or period-certain option that returns the balance to a beneficiary, at the cost of a lower payment.
Is delaying Social Security better than an annuity?
For many people it is cheaper guaranteed income, because each year of delay raises a benefit that also adjusts for inflation, but the two can be combined.