Variable Annuity Calculator - Calculate Growth & Income
Free calculator to determine investment growth, retirement income payments, and the impact of fees on variable annuity performance
Variable Annuity Calculator
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What is a Variable Annuity?
A variable annuity is an insurance product that combines investment growth with insurance guarantees. It allows tax-deferred growth during the accumulation phase and provides guaranteed income options during retirement.
This calculator helps with:
- Growth projections - Estimate annuity value at retirement
- Income planning - Calculate retirement income payments
- Fee analysis - Understand impact of annuity expenses
- Comparison tools - Compare with other investment options
- Death benefit - Evaluate guaranteed protection features
Variable Annuity Phases
Variable annuities have two main phases:
Accumulation Phase
Money grows tax-deferred in subaccounts. No taxes until withdrawal.
Annuitization Phase
Convert account value to guaranteed income stream for life or specific period.
Types of Variable Annuities
Basic Variable Annuity
Provides tax-deferred growth and investment options without additional guarantees.
Guaranteed Minimum Death Benefit
Guarantees beneficiaries receive at least the original investment amount.
Guaranteed Living Benefits
Provides minimum income or withdrawal guarantees during retirement.
How to Use This Variable Annuity Calculator
Enter Initial Investment
Input your starting investment amount (e.g., $50,000)
Set Annual Contribution
Enter planned yearly contributions (e.g., $10,000)
Input Expected Return
Enter expected annual investment return (e.g., 7.0%)
Set Current & Retirement Age
Enter your current age and planned retirement age
Understanding Annuity Fees
- •Mortality & Expense Fee: Typically 1.25-1.75% annually to cover insurance guarantees.
- •Administrative Fee: Usually 0.15% per year for account maintenance and recordkeeping.
- •Investment Management Fee: 0.5-2% annually for managing underlying subaccounts.
- •Total Impact: Combined fees of 2-3% significantly reduce long-term returns.
Variable Annuity Pros and Cons
Advantages
Tax-deferred growth, guaranteed death benefits, diversified investment options, guaranteed income stream options.
Disadvantages
High fees, complex terms, surrender charges, limited liquidity, potential loss of principal in investments.
Frequently Asked Questions
Common questions about variable annuities and retirement income planning
What is a variable annuity?
A variable annuity is an insurance contract that allows you to invest money in subaccounts (similar to mutual funds) with tax-deferred growth potential and guaranteed income options during retirement.
How do variable annuity fees work?
Variable annuities typically charge mortality and expense fees (1-2%), administrative fees (0.15%), and investment management fees (0.5-2%). These fees reduce your overall investment returns significantly.
What are the main benefits of variable annuities?
Variable annuities offer tax-deferred growth, guaranteed death benefits, and guaranteed income options. They provide investment diversification and professional money management.
What are the drawbacks of variable annuities?
High fees, complex terms, surrender charges, and limited liquidity are major drawbacks. The insurance features come at a significant cost that may outweigh the benefits for many investors.
When should I consider a variable annuity?
Variable annuities may be suitable for high-income investors who have maxed out other tax-advantaged accounts and want guaranteed income options. They're generally not ideal for most retail investors.
How do I calculate annuity income payments?
Annuity income depends on your account value, annuitization rates, your age, and payout options chosen. Most variable annuities offer various payout options including life-only or period-certain.
Are variable annuity death benefits worth it?
Death benefits guarantee beneficiaries receive at least the original investment amount. However, the high fees may reduce overall returns more than the death benefit protection is worth.
Can I lose money in a variable annuity?
Yes, the investment portion of variable annuities can lose value based on subaccount performance. Only the guaranteed death benefit and income options provide protection against loss.