What Is an Immediate Annuity Calculator?

Immediate annuities are popular investment vehicles offered by financial planners. These annuities provide income guarantees based on the lifespan of the investment's annuitant. Immediate annuities are different from deferred annuities where you allow the money to grow in a tax shelter until you need it. Annuity calculators are used to determine either premium payment or fixed payment options.

Annuity Calculator

An annuity calculator is used by insurance companies to determine the amount of money you will receive on a monthly, quarterly or annual basis. If you know how much money you will invest into the annuity, you can compute what your payment will be. They can also work in reverse. If you know how much income you will need to survive, you can enter than number in with your age and the calculator will tell you how much money you need to pay.

Mortality Tables

Annuities are investments provided by insurance companies. As a result, they use mortality tables to assess risk and financial exposure. Unlike traditional life insurance that considers your health and lifestyle attributes as well, annuities work off your life expectancy or, in some instances, your spouse's life expectancy. Therefore, when calculating annuity payments, the younger you are, the less money you can expect to receive on a monthly basis.

Lifetime vs. Period Certain

An annuity calculator can help you compute one of two ways to annuitize your investment. Choose to take regular payments for your entire lifetime, guaranteeing an income regardless of how many more years you live or choose to take your income for a period certain. If you are taking your income for a period certain that is lower than your life expectancy, you should get a higher income stream.

Survivor Benefit

You can open an annuity with a joint annuitant. If this is the case, you can use the annuity calculator to determine the amount based on your age and your spouse's age. You can still determine lifetime income or an income for a period certain. Should you die, your spouse will be able to get a survivor benefit that is a percentage of the total amount received upon initial annuitization. You may choose to have your spouse receive a 100 percent, 75 percent, 66 percent or 50 percent survivor benefit. The percentage is the percentage of the original payment received. The lower the survivor benefit, the higher your initial payments will be.

Deferred to Immediate

An annuity calculator can take your deferred annuity and compute how much income you can receive for the amount accumulated in the deferred account. Once you annuitize, you are no longer earning interest on the account. You can also annuitize a variable annuity that will take the cash value and place it into an immediate annuity, based on the sub-account liquidated cash value. You can use the annuity calculator to see if you will need the entire deferred annuity to meet your income needs. If you do not need all of it, place the amount needed into an immediate annuity and all the rest to grow deferred.

References

• Lifetime Annuity Calculator