Annuity Calculator

Use this free annuity calculator to track how your investment grows with regular contributions and see what happens when you start taking withdrawals.

Annuity Calculator

Estimate growth with contributions and model withdrawals

Starting Balance $10,000
$
Annual Contribution $5,000
+
Monthly Withdrawal $0
–
Growth Rate (Interest) 6.0%
Duration (Years) 20 years

Ending Balance

$0

Total Principal Invested
$0
Total Interest Earned
$0
Total Withdrawn
$0

Growth & Withdrawal Over Time

Accumulation Schedule

Year Start Bal Contrib Withdraw Interest End Bal

People Also Ask About Annuities

What is an annuity in simple terms?
An annuity is a financial contract between you and an insurance company. You make a lump-sum payment or a series of payments, and in return, the insurer agrees to make periodic payments to you, beginning immediately or at some future date. It is often used as a retirement income stream to ensure you don’t outlive your savings.
What is the difference between fixed and variable annuities?
A fixed annuity provides guaranteed payouts based on a predetermined interest rate, offering safety and stability. In contrast, a variable annuity allows you to invest your premiums in various investment options, such as mutual funds. The payouts from a variable annuity fluctuate based on the performance of those investments, offering higher potential returns but with greater risk.
Can you lose money in a fixed annuity?
Generally, no. The principal investment in a fixed annuity is protected by the insurance company’s ability to pay. As long as you abide by the terms of the contract, you will not lose your initial investment due to market downturns. However, if you surrender the annuity early during the surrender charge period, you may incur penalties that reduce your cash value.
How are annuity payments calculated?
Payments are calculated based on several factors: the premium amount (how much you put in), the interest rate (or investment return), the length of time the money is allowed to grow, and your life expectancy (for lifetime income options). The insurer uses these factors to determine how much they can pay out periodically without exhausting the principal too quickly.
Are annuities a good investment for retirement?
Annuities can be excellent for specific retirement goals, particularly for risk-averse individuals seeking guaranteed income. They act as a safeguard against market volatility and longevity risk. However, they often come with higher fees and lower liquidity compared to standard investment portfolios like IRAs or 401(k)s. They are best used as a portion of a diversified retirement strategy rather than the sole vehicle.
Are annuities taxable?
Yes, but in a specific way. When you put money into an annuity, the growth is tax-deferred, meaning you don’t pay taxes on the earnings until you withdraw them. When you do start receiving payments, the earnings portion of the payment is taxed as ordinary income. If you funded the annuity with pre-tax dollars (like from a 401k rollover), the entire payment is taxable.
What is a surrender charge?
A surrender charge is a fee imposed by the insurance company if you withdraw money from an annuity contract within a certain number of years after purchasing it. This period is known as the “surrender period” and can last anywhere from 6 to 10 years. The fee usually decreases over time, eventually disappearing once the surrender period ends.

What Is an Annuity Calculator

An annuity calculator tracks how your investment grows with regular contributions and shows what happens when you start taking withdrawals. It models both the accumulation phase, where money builds up, and the distribution phase, where you draw income. This helps you plan retirement income or test different savings strategies.

Annuity Calculator Input Fields Explained

Starting Balance

Your initial investment amount. This could be a 401(k) rollover, savings you’ve accumulated, or a lump sum from an inheritance. The calculator shows how this base amount grows over time with interest and contributions.

Annual Contribution

The money you add each year during the accumulation phase. This gets divided into monthly deposits automatically. Regular contributions significantly boost your final balance through compound growth over decades.

Monthly Withdrawal

The amount you take out each month during distribution. Set this to zero during accumulation years, then adjust it when modeling retirement income. The calculator shows if withdrawals deplete your balance prematurely.

Growth Rate (Interest)

Expected annual return percentage. Conservative investments might earn 4-5%, balanced portfolios around 6-7%, and aggressive growth 8-10%. This rate compounds on your growing balance, creating exponential growth over time.

Duration

How many years to model. For accumulation, this might be 20-30 years until retirement. For distribution planning, model how long your money lasts with specific withdrawal rates.

Reading Your Results for The Annuity Calculator

Ending Balance

Your account value after the specified years. If you’re accumulating, this shows total wealth built. If withdrawing, it reveals the remaining balance. “Depleted” means withdrawals exhausted the account before the timeline ended.

Total Principal Invested

All money you personally contributed, starting balance plus annual contributions over the years. This is your actual cash investment before any growth.

Total Interest Earned

Profit from compound growth. The difference between your ending value (plus withdrawals) and total principal. Higher growth rates and longer timeframes create dramatically larger interest earnings.

Total Withdrawn

Sum of all monthly withdrawals taken over the period. This money came out of your account to provide income. Compare this to your principal to see if you’re living off interest or eating into contributions.

Growth and Withdrawal Chart

Visual timeline showing the account balance each year. The accumulation phase shows a steady upward climb. The distribution phase might show a decline if withdrawals exceed growth, or continued growth if withdrawals are modest.

Accumulation Schedule Table

Year-by-year breakdown with starting balance, contributions, withdrawals, interest earned, and ending balance. Watch how interest amounts grow over time as your base balance increases.

Using the Annuity Calculator

Test different contribution levels to see the required savings for your goals. Want $1 million by retirement? Adjust contributions until you hit that target with realistic growth rates.

Model sustainable withdrawal rates. The common 4% rule suggests withdrawing 4% annually. Test if your balance survives 30 years at different percentages. Adjust if the account depletes too soon.

Compare growth rates to see the investment strategy. Conservative 4% versus aggressive 9% shows enormous differences over 25 years. Decide if higher risk justifies potential rewards.

Planning Scenarios

Accumulation phase modeling shows retirement readiness. Enter your current age, planned retirement age, and see if your contribution rate builds sufficient wealth. Adjust contributions or retirement age as needed.

Distribution phase testing reveals income sustainability. Start with your projected retirement balance, set monthly withdrawals, and verify money lasts 25-35 years. Many retirees underestimate longevity.

Mixed scenarios combine both phases. Accumulate for 15 years, then switch to withdrawals. See how balance transitions from growth to income mode and whether it sustains your lifestyle.

Common Patterns

Front-loading contributions creates better results than back-loading. Money contributed early gets more compounding years. $5,000 invested at age 30 outperforms $10,000 at age 50.

Conservative withdrawals preserve principal while aggressive ones deplete it. Taking 3% annually often sustains indefinitely. Taking 7% typically exhausts funds within 15-20 years regardless of starting balance.

Higher growth rates allow higher withdrawals. At 8% growth, you can withdraw 5% and still grow. At 4% growth, withdrawing 5% slowly drains your account.

Withdrawal Strategy Tips

Start with lower percentages to preserve capital. Better to withdraw 3.5% and adjust upward than start at 6% and run dry in year 18. Conservative starts provide flexibility.

Consider variable withdrawals tied to balance. Take 4% in good market years, 3% after market drops. This preserves principal during downturns and extends account longevity.

Delay Social Security to reduce account withdrawals. Each year you postpone increases your benefit 8%. Living off savings early while maximizing Social Security later often works best.

Conclusion

This Annuity Calculator removes guesswork from retirement and savings planning. You see exactly whether your strategy works or needs adjustment. Test different combinations of contributions, growth rates, and withdrawals until you find a sustainable plan that meets your goals and risk tolerance.