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Deferred Annuity Calculator

See how your deferred annuity grows before payouts start, and what it could pay you later.

How it is calculated

Two stages, both at the same yearly rate: the premium grows during the deferral, then the grown balance is paid out in equal yearly amounts.

accumulated = P × (1 + g)d
annual payout = accumulated × g ÷ (1 − (1 + g)−n)
monthly payout = annual payout ÷ 12

P is the one-time premium in dollars, g the growth rate as a decimal, d the deferral years and n the payout years. The payout runs for a fixed number of years until the balance reaches zero; it is not a lifetime payment. At 0% growth the payout is the balance divided by the payout years. Inputs outside these limits show no result: premium above zero, growth above −100%, deferral from 0 to 100 years, payout from 1 to 100 years. Fees, taxes and inflation are not included.

Worked example

A $100,000 premium grows at 4% for a 15-year deferral, then pays out over 20 years. Accumulated value = 100,000 × 1.0415 = $180,094.35. Annual payout = 180,094.35 × 0.04 ÷ (1 − 1.04−20) = $13,251.66. Monthly payout = 13,251.66 ÷ 12 = $1,104.30. Over the 20 years the payments add up to about $265,000, because the balance keeps earning 4% while it is paid out.

Try this example →

Common mistakes

  • Reading the payout as a lifetime income. It is a fixed-term schedule that ends after the payout years you enter; a real life annuity would be priced differently.
  • Using a guaranteed rate for the whole period when the product is index-linked. The tool applies one flat rate, so a variable crediting rate needs several test runs.
  • Entering the payout period as the age at which payments start. Both period fields are lengths in years; the age you start is your current age plus the deferral years.
  • Entering a payout period under 1 year, a deferral above 100 years, or a premium of 0. All of these show no result.
  • Ignoring inflation. A payment of $13,251.66 starting in 15 years buys much less than the same amount today, and the tool does not adjust for that.

Sources

About this calculator

A deferred annuity is an insurance contract with two distinct phases: an accumulation phase, during which your premium grows tax-deferred (either at a fixed rate or tied to an index, depending on the product), and a later payout (annuitization) phase, during which the accumulated value is converted into a stream of regular payments — for a fixed number of years or, with many real contracts, for life.

Retirement planners use deferred annuities, including deferred income annuities (DIAs) and qualified longevity annuity contracts (QLACs), to convert a lump sum into guaranteed future income while deferring both taxes and the start of payments to a later, chosen date — commonly used to insure against outliving other retirement savings, since payouts can be structured to begin at an advanced age like 80 or 85.

This calculator projects how much your deferred annuity grows during the accumulation period based on your contribution, growth rate, and years until payout begins, then estimates the annual and monthly payment if that accumulated value is paid out evenly over a number of years you choose, assuming the same growth rate continues during the payout. It does not model lifetime payouts, which depend on an insurer's pricing and your life expectancy.

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