Free deferred annuity calculator
Model both phases of a deferred annuity — grow a premium and optional yearly contributions tax-deferred during the accumulation phase, then see the projected value and the monthly income it produces during payout, updated live, as you type.
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Estimates only, based on a constant growth and payout rate. Not financial or tax advice.
Results are estimates. Consult a professional.
What is a deferred annuity?
A deferred annuity is a two-phase contract you buy from an insurance company. First comes an accumulation phase: you pay a premium — and, if you like, add to it each year — and the money grows tax-deferred at a set rate for a fixed number of years. Then the contract switches to a payout phase, converting whatever it has grown into a stream of income, usually monthly. This deferred annuity calculator models both phases at once: it projects the value your premium and contributions reach by the end of accumulation, then shows the monthly income that value produces once payouts begin.
The word that matters is deferred. Income is pushed out to a future date, which is exactly what makes the contract a retirement tool: every year of deferral is another year of tax-deferred compounding before a single dollar of income is paid. That is the opposite of an immediate annuity, which skips accumulation entirely and starts paying within a year — a distinction this page returns to below.
Deferred annuity formula
A deferred annuity is two time-value-of-money calculations chained together. The accumulation phase compounds the premium and the contribution stream forward; the payout phase annuitizes the result back out as income.
The first term grows the lump-sum premium; the second is the future value of the contribution stream (an ordinary annuity, with each year's deposit added at year-end). Their sum, V, becomes the premium of the payout phase, where it is spread into level monthly income over the payout period.
What you enter
The calculator needs six inputs — four describe the accumulation phase and two describe the payout phase:
- Initial premium — the lump sum you pay in to open the contract.
- Annual contribution — an optional level amount added at the end of each year. Set it to $0 for a single-premium deferred annuity (SPDA).
- Growth rate — the annual rate credited during accumulation. A fixed deferred annuity guarantees this rate; for a variable or indexed contract, use a conservative assumed return.
- Years until payout — how long the money accumulates before income starts. This is the lever that most separates a deferred annuity from an immediate one.
- Payout rate — the annual rate used to convert the projected value into income once payouts begin.
- Payout period — how many years the income lasts (a period-certain payout).
A worked example using the deferred annuity calculator
Marisa, age 45, opens a fixed deferred annuity with a $50,000 premium and plans to add $5,000 at the end of every year. The contract credits 6% a year during accumulation. She wants income at 65, so she sets a 20-year accumulation, then a 7% payout rate over a 20-year payout period.
Step 1 — Project the accumulation phase
Marisa paid in $150,000 ($50,000 premium plus twenty $5,000 contributions); tax-deferred compounding added $194,284.73 on top, for a projected value of $344,284.73 at age 65.
Step 2 — Convert to monthly income
Deferred annuity vs. immediate annuity
The single feature that defines a deferred annuity is the accumulation phase — and that is exactly what an immediate annuity does not have. With an immediate annuity (often a single-premium immediate annuity, or SPIA), you hand over a lump sum and income begins within about a year; there is no time for the premium to grow first. A deferred annuity instead lets the premium compound, tax-deferred, for years before any income is paid.
The difference is dramatic. Take Marisa's $50,000 premium alone (no yearly contributions). Annuitized immediately at 7% over 20 years, it pays about $387.65 a month. Left to grow at 6% for 20 years first, that same $50,000 reaches $160,357 and then pays about $1,243 a month over 20 years — more than triple, purely because of the deferral. You can reproduce this in the calculator by setting years until payout to 0 for the immediate case.
| Deferred annuity | Immediate annuity | |
|---|---|---|
| Accumulation phase | Yes — money grows first | None — income starts now |
| When income begins | A future date you choose | Within about a year |
| Best for | Saving for retirement years ahead | Turning savings into income now |
| Tax treatment of growth | Deferred until withdrawal | Each payment part-taxed as received |
The accumulation phase is the defining difference between the two contracts.
How the deferral period changes the income
Because accumulation is where the compounding happens, the years until payout move the result more than any other single input. The table holds the example fixed — a $50,000 premium, $5,000 a year, 6% growth, then a 7% payout over 20 years — and varies only the accumulation length.
| Years until payout | Total contributed | Projected value | Monthly income |
|---|---|---|---|
| 5 | $75,000 | $95,097 | $737 |
| 10 | $100,000 | $155,446 | $1,205 |
| 15 | $125,000 | $236,208 | $1,831 |
| 20 | $150,000 | $344,285 | $2,669 |
| 25 | $175,000 | $488,916 | $3,791 |
| 30 | $200,000 | $682,465 | $5,291 |
$50,000 premium + $5,000/yr at 6% growth, then a 7% payout over 20 years. Figures computed by this calculator.
How a deferred annuity is taxed
The headline benefit during accumulation is tax deferral: earnings inside a non-qualified deferred annuity are not taxed as they grow, only when you take income. IRS Publication 575 explains how that income is then taxed — for a non-qualified annuity, each payment is split into a tax-free return of your basis (the after-tax premium you paid in) and a taxable portion representing earnings, using an exclusion ratio.
- Growth is deferred, not tax-free. Unlike a Roth, the earnings are eventually taxed as ordinary income when withdrawn.
- Withdrawals before age 59½ may trigger a 10% additional tax on the taxable portion, on top of ordinary income tax.
- Surrender charges from the insurer can apply if you withdraw during the contract's early years — separate from any tax.
Assumptions and limitations
The projection rests on a few simplifying assumptions worth keeping in mind before you rely on the numbers:
- Constant rates. One fixed growth rate runs through accumulation and one fixed payout rate runs through payout. Variable and indexed annuities have returns that move with markets, so use a conservative assumed rate for those.
- Level annual contributions. Contributions are assumed equal and added at the end of each year. Irregular top-ups would change the result.
- Period-certain payout. Income is spread over a fixed number of years. A real life-only annuity is instead priced from mortality tables and may pay for as long as you live.
- No fees or taxes. The figures are gross. Insurer fees, surrender charges, and taxes on the earnings portion will reduce what you actually keep.
Formula sources and methodology
The accumulation math is the standard future value of a lump sum plus the future value of an ordinary annuity; the payout math is the standard annuity-payment (amortization) formula. The calculator chains them: it grows the premium and contributions for the years until payout, then annuitizes the projected value at the payout rate over the payout period. The accumulation-then-payout structure and the tax-deferral treatment follow the official descriptions from FINRA / SEC investor.gov and IRS Publication 575.
U.S. SEC / Investor.gov — Annuities (accumulation phase vs. payout phase; deferred vs. immediate).FINRA — Annuities (deferred annuities and how they are taxed).IRS Publication 575 — Pension and Annuity Income (tax deferral and taxation of annuity payments).Frequently asked questions about the free deferred annuity calculator
About this Deferred annuity calculator
This deferred annuity calculator runs entirely in your browser — nothing you enter is stored or sent anywhere. It projects both phases of a deferred annuity: the premium and any annual contributions grow tax-deferred at your growth rate during accumulation, then the projected value is annuitized into level monthly income over your payout period. It is a pre-tax planning estimate, not a contract illustration, an insurance quote, or financial advice; figures exclude fees, surrender charges, and taxes on the earnings portion.
It is one of our free retirement calculators. For income that starts now instead of later, compare the immediate annuity and fixed annuity calculators, or browse the complete calculators directory.