Annuity Calculator

How This Annuity Projection Works

An annuity is a contract, typically issued by an insurance company, that turns a stream of contributions (or a lump sum) into a future pool of money — and later, optionally, into a stream of guaranteed payments. This calculator covers the first half of that story: the accumulation phase, where equal monthly contributions compound at a fixed assumed rate of return until the annuity matures or you choose to annuitize it.

$$FV = C \times \frac{(1+r)^n - 1}{r}$$

This is the standard future-value-of-an-ordinary-annuity formula, and it's exact — no simulation shortcuts are needed, since every contribution is the same size and the rate is assumed constant. The calculator still builds a month-by-month schedule internally so the year-by-year table and chart can show the running balance split into its two layers, contributions and growth, at every step. If you enter an optional starting lump-sum premium, its own compound growth (P(1+r)^n, the same term used on the IRA and 401(k) pages) is added on top of the contribution-based future value above.

Worked Example: 300 Dollars a Month for 15 Years at 5%

Using the calculator's own default inputs — a 300-dollar monthly contribution, a 5% annual rate of return, over 15 years — the future value comes out to roughly 80,187 dollars. Of that, 54,000 dollars came directly from your own contributions (300 dollars times 180 months), and the remaining roughly 26,187 dollars is investment growth compounding on top of them.

Fixed vs. Variable Annuities

A fixed annuity guarantees the rate of return you enter here, contractually, for some stated period. A variable annuity instead invests your contributions in subaccounts similar to mutual funds, so its actual return floats with market performance and isn't guaranteed at all — the single rate you enter for a variable annuity is really just an assumption to test, not a promise. Indexed annuities sit somewhere in between, offering a return tied to a market index with both a floor and a cap. This calculator treats the rate as a flat, guaranteed assumption regardless of which type you're modeling, so treat the projection accordingly.

Annuities as an Insurance Product, Not Just an Investment

Unlike a plain brokerage account, an annuity is fundamentally an insurance contract — the issuing company is taking on risk (guaranteeing a rate, or later, guaranteeing you can't outlive your payments) in exchange for fees and contract terms that a plain investment account doesn't carry. That's a meaningfully different product from a savings or investment account earning a similar rate, even though the accumulation-phase math shown here looks identical either way.

Common Annuity Planning Mistakes

Ignoring fees and surrender charges is one of the most common — the optional Annual Fee / Expense field lets you model an ongoing administrative or mortality-and-expense charge, but one-time surrender charges for early withdrawal still aren't modeled, so an actual accumulated balance can still run below this projection if you withdraw early. Treating a variable annuity's assumed rate as guaranteed is another — only a fixed annuity actually promises the rate you enter. Forgetting that annuity earnings are generally taxed as ordinary income when withdrawn, not at lower capital-gains rates, is a third gap worth planning around — see the Tax Comparison section above to see roughly how much that difference could cost.

Annuity Terms You Should Know

Accumulation Phase — the period during which you contribute to an annuity and it grows, before any payout begins; what this calculator projects.

Annuitization — the point at which an annuity's balance converts into a stream of periodic payments, often for life.

Fixed Annuity — an annuity that guarantees a specific rate of return for a stated period.

Variable Annuity — an annuity whose return depends on the performance of underlying investment subaccounts, with no guaranteed rate.

Surrender Charge — a fee an insurer may charge for withdrawing from an annuity earlier than the contract's stated surrender period.

This calculator provides estimates for educational and planning purposes only, based on a simplified fixed-rate, equal-contribution model. It is not financial or tax advice, and does not account for fees, surrender charges, or taxes. Consult a licensed financial advisor or insurance professional for guidance specific to a real annuity contract.