What is the difference between fixed and variable annuities?

A fixed annuity guarantees a specific payout rate — your monthly income is predictable and doesn't change with markets. A variable annuity invests your premium in subaccounts (similar to mutual funds), so your eventual payout depends on investment performance. Fixed annuities provide security and planning certainty; variable annuities offer growth potential but with market risk. Most retirement income planning favors fixed immediate annuities for their guaranteed floor of income.

Are annuity payments taxable?

If you purchase an annuity with pre-tax money (from a 401k, traditional IRA, or rollover), the full payment is taxable as ordinary income. If purchased with after-tax money (non-qualified annuity), each payment is partially a tax-free return of principal and partially taxable earnings — the exclusion ratio determines which portion is tax-free. Annuity income is not subject to self-employment tax and doesn't count as earned income.

What happens to my annuity if the insurance company fails?

Annuities are backed by state guaranty associations, not FDIC. Coverage limits vary by state but typically protect $250,000 in annuity values per insurer. To protect against insurer insolvency, consider: only buying from highly-rated insurers (A+ from AM Best), spreading large annuity purchases across multiple insurers, and checking your state's guaranty association limits before purchasing.

Should I buy an annuity or just invest the lump sum?

The annuity wins if you live longer than the break-even point and value the certainty of guaranteed income over investment flexibility. The invested lump sum wins if you have a shorter life expectancy, want to leave the money to heirs, or believe you can earn returns that outpace the annuity's implied return. Many financial planners suggest a hybrid: annuitize enough to cover essential expenses (housing, food, healthcare) and invest the rest for growth and flexibility.

🌅Retirement

Annuity Payout Calculator: How Much Monthly Income Will You Receive?

How much income will your annuity pay?

What This Does

An annuity converts a lump sum of money into a guaranteed income stream — but the payout rate you receive depends on your age, the annuity type, interest rates at purchase time, and the payout option you select. This calculator shows you estimated monthly income from your annuity based on current payout rates, and compares different payout structures so you can make an informed decision. The most important distinction is between immediate annuities (you give an insurer a lump sum and begin receiving income within a month) and deferred annuities (the lump sum grows tax-deferred for years before converting to income). Payout options add another layer: a life-only annuity maximizes monthly income but stops when you die; a joint-and-survivor annuity continues payments to a spouse; a period-certain annuity guarantees payments for a set number of years regardless of when you die. Annuity payout rates (typically expressed as dollars of monthly income per $100,000 invested) fluctuate with interest rates. In a high-rate environment, annuities become significantly more attractive — a 65-year-old male buying an immediate annuity in 2024 might receive $590–650/month per $100,000 purchased, compared to $450–500 in 2020. This calculator uses current-rate approximations and clearly identifies the assumptions behind each estimate. Understanding your break-even point — how long you need to live to recoup your premium — is critical for the lump-sum vs. annuity decision.

When Should You Use This?

→Deciding whether to buy an immediate annuity with retirement savings or a pension lump sum
→Comparing different annuity payout options (life-only, joint, period certain)
→Calculating how long you need to live to break even on an annuity purchase
→Estimating income from an existing deferred annuity approaching annuitization
→Building a retirement income floor from multiple guaranteed income sources

Example Scenario

Patricia, age 67, has $250,000 from a pension buyout. The calculator shows her immediate annuity options: life-only pays $1,475/month ($17,700/year); joint-and-50%-survivor pays $1,325/month; 10-year period certain pays $1,390/month. Life-only break-even: $250,000 ÷ $1,475 = 169 months (14.1 years), meaning she must live past age 81 to come out ahead. She's in good health with family history of longevity — she selects life-only to maximize monthly income.

Annuity Payout Calculator

Monthly Income · Break-Even · Inflation Impact · Portfolio Comparison

Results update in real time as you adjust any input.

Annuity Details

Premium (Lump Sum)

Payout Type

Guaranteed Payout Rate (%)

SPIA at age 65: ~5–6% · age 70: ~6–7%

Payout Frequency

Longevity & Comparison

Your Current Age

Life Expectancy

US avg: male 76, female 81 · healthy 85+

Inflation Rate (%)

US 40yr avg: ~3% · Fed target: 2%

Portfolio Return (%)

Balanced portfolio: 5–7% · Equities: 7–10%

About This Calculator

This annuity payout calculator computes monthly and annual guaranteed income from a single-premium annuity, including immediate and deferred variants. It calculates the payout rate (annual income ÷ premium), break-even point (years and age), inflation-adjusted real income at 5-year intervals, and a year-by-year comparison against self-managing the premium with a 4% annual portfolio withdrawal. All results update in real time across all nine inputs: premium, payout type, deferral period, guaranteed rate, frequency, age, life expectancy, inflation rate, and portfolio return.

The Portfolio Comparison tab renders a stacked area chart of annuity cumulative payouts (accent colour) and portfolio cumulative withdrawals (emerald) over 30+ years, with a dashed line for remaining portfolio balance — the crossover where the portfolio depletes shows when longevity risk becomes critical. The Inflation tab shows a line chart of nominal vs real (inflation-adjusted) annual payout over 30 years, and a stacked bar chart of real value remaining vs the amount lost to inflation at each 5-year milestone. The Premiums tab shows a bar chart of monthly income at six standard premium sizes, and a comparison bar chart of annuity vs 4% rule monthly income at the current premium.

Dynamic accent colours reflect annuity value score: emerald (Excellent Terms ≥80), indigo (Good Value ≥65), amber (Acceptable ≥45), orange (Review Carefully ≥25), red (Unfavorable). The score rewards higher payout rates, earlier break-even, longer expected payout duration, and shorter deferral periods. Four risk flags auto-trigger: break-even beyond 20 years, inflation erosion warning, payout rate below 4.5%, and deferral beyond 7 years. All four insights and all four What To Do Next steps are score-adaptive, distinguishing between strong-terms scenarios (optimise the deal) and weak-terms scenarios (consider alternatives).

Results are estimates only and do not constitute financial, tax, or legal advice. Consult a qualified professional before making financial decisions.