Fixed Deferred Annuity Formula:
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A fixed deferred annuity is a contract with an insurance company where you make a lump-sum payment or series of payments that grow at a guaranteed interest rate during the accumulation phase before being converted to income payments.
The calculator uses the future value formula for fixed deferred annuities:
Where:
Explanation: The formula calculates compound growth of your initial investment at a guaranteed rate over a specified number of periods.
Details: Calculating future value helps with retirement planning by showing how much your annuity investment could grow before you begin taking withdrawals.
Tips: Enter initial investment in USD, fixed interest rate as a decimal (e.g., 0.05 for 5%), and number of deferral periods. All values must be positive.
Q1: What's the difference between fixed and variable annuities?
A: Fixed annuities offer guaranteed rates while variable annuities invest in subaccounts with market-based returns.
Q2: Are there tax advantages to deferred annuities?
A: Yes, earnings grow tax-deferred until withdrawal, though withdrawals before age 59½ may incur penalties.
Q3: How often is interest compounded?
A: This calculator assumes annual compounding. Actual contracts may compound differently (daily, monthly, etc.).
Q4: What happens after the deferral period?
A: You can begin taking periodic payments, take a lump sum, or continue deferring (options vary by contract).
Q5: Are there fees not accounted for in this calculation?
A: Some annuities have surrender charges or other fees that would reduce actual returns.