Immediate Annuity Calculator
We designed the immediate annuity calculator to help you in any matter raised in immediate annuity formulae calculations. More specifically, you can use the present tool to answer the following questions:
- How much can you withdraw to deplete your initial investment or to reach a specific balance?
- How much money should you invest to be able to withdraw a specific amount over a given term?
- How long can your annuity last?
- What rate of return is needed for a particular annuity?
- How much money will remain after withdrawing for a given term?
Read further, and we explain what an immediate annuity is, show you how to use the immediate annuity calculator, present some immediate annuity payout options, and you can check the disadvantages of an annuity.
If you want to learn more about annuity as a concept and apply a more general tool, check our annuity calculator.
What are the immediate annuity payout options?
There are multiple ways to transform a single premium immediate annuity (SPIA) into periodic payouts. You can consider the following options and choose the most suitable one for your financial needs and future retirement goals:
- Life with period certain — It guarantees lifetime payments and provides payouts for your beneficiary if you pass away during a specific time.
- Systematic withdrawals (fixed amount) — This immediate annuity payout option allows you to choose a certain amount of payouts with the specific term depending on your initial investment without guaranteeing withdrawals for life.
- Lump-sum payment — You will receive a one-time lump-sum payout from the annuity provider if you choose this option.
- Joint-life — Joint and survivor annuities provide payouts to your beneficiary for the rest of their life after you pass away.
How to use the immediate annuity formulae within our calculator
To apply the immediate annuity calculator, you first need to choose what you would like to compute. We will use the same immediate annuity formula for each case, but a rearrangement is required. Your options are:
- How much can I withdraw?
- How much money should I invest?
- How long can I withdraw for?
- What rate of return is needed?
- How much money will remain?
1. Annuity specifications
- Payment frequency — The regularity of annuity payouts;
- Timing of withdrawals — You can choose between the beginning of the period (annuity due) or the end of the period (ordinary annuity);
- Compounding frequency — The frequency interest is added to the principal balance of your investment, or, in other words, how often the earned return or interest is reinvested. You can adjust this by ticking the
Change compounding frequencycheckbox; and - Annuity starts from — The first day of the annuity.
2. Annuity inputs
- Amount to invest — Your initial balance, which is the present value (PV) of your investment.
- Payment amount — The amount you would like to withdraw from your annuity.
- Remaining balance (available when you check
Display more annuity parameters) — The future value (FV) of your annuity. By default, it is set to zero, which means you completely deplete the initial balance, but you may set this variable as you please; - Length of withdrawal — The interval during which the annuity pays out;
- Expected rate of return — The annual nominal interest rate; and
- Annual/periodic growth rate (
Display more annuity parameters) — This option enables you to set a specific rate of change (increase or decrease) in the annuity payout, so, for example, you can make a cost of living adjustment in your annuity.
2. Results
After setting all parameters, you will be able to see the result immediately. You can then study all of the details of your immediate annuity in the summary table.
3. Balances and schedules
You can also follow the progress of your lump sum investment in a payment schedule.
Immediate annuity calculator disclaimer
You should consider the immediate annuity calculator as a model for financial approximation. All payment figures, balances, and interest figures are estimates based on the data you provided in the specifications that are, despite our best effort, not exhaustive.
For this reason, we created the calculator for instructional purposes only. Still, if you experience a relevant drawback or encounter any inaccuracy, we are always pleased to receive helpful feedback and advice.
FAQs
What is a single premium immediate annuity?
A single premium immediate annuity is a type of annuity where the initial annuity premium is converted into a stream of periodic payments.
What are the disadvantages of an annuity?
While annuity ensures a certain guaranteed income, it comes with a cost. In general, annuity holders pay fees up-front and give up potential returns likely earned with alternative investments.
How much can I withdraw monthly from $100,000 immediate annuity taken for ten years?
Of course, the answer depends prominently on the rate of return offered by the annuity provider. Let's say, if the annual rate of return is 2%, the monthly payout of a 10-years immediate annuity of $100,000 will be $918.60.