Single Premium Deferred Annuity Calculator

Annuity Calculation Formulas:

\[ FV = PV \times (1 + r)^n \] \[ Payout = FV \times \frac{r}{1 - (1 + r)^{-m}} \]

Initial Premium (PV):

USD

Annual Interest Rate (r):

decimal

Deferral Years (n):

years

Payout Periods (m):

unitless

Future Value (FV):

Periodic Payout:

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is a Single Premium Deferred Annuity?

A Single Premium Deferred Annuity (SPDA) is a contract where you make a lump-sum payment to an insurance company that grows tax-deferred until you begin receiving payments at a future date. It provides guaranteed income in retirement.

2. How Does the Calculator Work?

The calculator uses these formulas:

\[ FV = PV \times (1 + r)^n \] \[ Payout = FV \times \frac{r}{1 - (1 + r)^{-m}} \]

Where:

\( PV \) — Initial premium payment (USD)
\( r \) — Annual interest rate (decimal)
\( n \) — Deferral period (years)
\( FV \) — Future value at end of deferral period (USD)
\( m \) — Number of payout periods (unitless)
\( Payout \) — Periodic payment amount (USD)

Explanation: The first formula calculates the accumulated value after the deferral period, the second calculates the periodic payment amount during the payout phase.

3. Importance of Annuity Calculations

Details: Accurate annuity calculations help in retirement planning by projecting future income streams and understanding how different interest rates and time periods affect payouts.

4. Using the Calculator

Tips: Enter the initial premium in USD, annual interest rate as a decimal (e.g., 0.05 for 5%), deferral period in years, and number of payout periods. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between immediate and deferred annuities?
A: Immediate annuities begin payments right after purchase, while deferred annuities accumulate value for years before payments start.

Q2: How is the interest rate determined?
A: Insurance companies set rates based on market conditions and the annuity type (fixed, indexed, or variable).

Q3: Are annuity payments guaranteed?
A: Fixed annuity payments are guaranteed by the insurer, while variable annuity payments depend on investment performance.

Q4: What are typical payout periods?
A: Common periods are 10, 15, 20 years or lifetime. This calculator assumes payments continue for the specified periods.

Q5: Are there tax implications?
A: Earnings grow tax-deferred, but payments are taxed as ordinary income when received (except for return of principal).