IRA Annuity Calculator: Compare Income With Withdrawals
Use this guide to understand the assumptions, inputs, results, and next steps behind the calculator.
Created by Luis Gonzalez · Last updated July 29, 2026
An IRA annuity is an annuity contract held inside an Individual Retirement Account. The account wrapper and the insurance contract are separate: IRA rules govern distributions and taxes, while the contract determines the payment terms and guarantees. This calculator estimates income from an assumed annuity payout rate and compares it with a systematic withdrawal from the same IRA balance.
The projection is useful for testing income assumptions, not for obtaining an insurer’s quote. Actual payouts depend on contract pricing, age, payment form, interest rates, guarantees, fees, and whether payments cover one person or a survivor. Compare it with a retirement annuity estimate or a lifetime annuity projection before drawing conclusions.
Enter the balance and compare payout assumptions
Enter the IRA balance, age, annuity payout rate, expected investment return, and systematic withdrawal rate. The annuity estimate is the balance multiplied by the payout rate. The systematic withdrawal estimate is the balance multiplied by the withdrawal rate.
The calculator also accepts a cost-of-living adjustment, survivor option, and inflation rate. In the supplied model, selecting a joint survivor option reduces the initial annuity amount by 20%. The COLA increases modeled annual payments. The annuity type input does not appear in the supplied computation, so changing that selection should not be assumed to change the displayed projection.
The projection runs from the current age through age 95, inclusive. The default inputs are a $500,000 IRA at age 65, a 5.5% annuity payout rate, a 4% withdrawal rate, 6% expected return, no COLA, no survivor reduction, and 3% inflation.
Default result: $500,000 IRA at age 65
At a 5.5% payout rate, the calculator estimates $27,500 per year, or $2,292 per month, before tax:
Annual annuity estimate = IRA balance × payout rate
$500,000 × 0.055 = $27,500
At a 4% systematic withdrawal rate, the initial withdrawal estimate is $20,000 per year. The difference between the starting estimates is $7,500 annually:
Initial withdrawal estimate = IRA balance × withdrawal rate
$500,000 × 0.04 = $20,000
Income difference = $27,500 − $20,000 = $7,500 per year
The calculator reports $852,500 in cumulative annuity payments and $620,000 in cumulative withdrawals through the age-95 projection. These totals include every yearly row from 65 through 95—31 payment rows, including both endpoints. They are nominal sums, not present values, and do not account for taxes or the value of assets remaining at the end.
In this default example, annuity income stays at $27,500 per year because the COLA is zero. At age 95, after 30 years of 3% inflation, that amount is estimated to have purchasing power of $11,330 in today’s dollars. The calculator’s systematic withdrawal starts at $20,000 and is also modeled without a COLA, resulting in $8,240 in today’s dollars at age 95.
The withdrawal comparison assumes a 6% annual return on the remaining balance. Its reported balance is $1,195,712 at age 95, and the model does not show the balance running out. That result is not guaranteed: actual investment returns vary, and a sequence of poor returns early in retirement can have a different effect from a steady 6% return.
Compare payout, survivor, and inflation choices
An annuity payment is typically higher when fewer guarantees or survivor benefits are included. This calculator’s survivor setting uses a 20% reduction, so its impact can be illustrated directly. A joint-life contract’s actual reduction is set by the insurer’s pricing and the ages and options selected.
| Scenario | IRA balance | Payout assumption | Initial annual annuity estimate |
|---|---|---|---|
| Lower payout rate | $400,000 | 4.5% | $18,000 |
| Default payout rate | $500,000 | 5.5% | $27,500 |
| Higher payout rate | $600,000 | 6.5% | $39,000 |
| Default balance with modeled survivor reduction | $500,000 | 5.5%, less 20% | $22,000 |
A larger payment is not automatically the better choice. Compare whether payments continue for life, whether a beneficiary receives a refund or continuing income, whether payments rise with inflation, and whether the contract can be surrendered or accessed. An inflation adjustment can protect purchasing power, but typically changes the initial payout offered by a real contract.
A systematic withdrawal preserves control of the account and may leave assets to heirs, but income and remaining balance depend on investment performance and withdrawal timing. An annuity may provide contractual income for life, depending on the purchased option, but can limit liquidity and may leave little or nothing to beneficiaries. To examine another contract structure, try an immediate annuity calculator or an annuity calculator.
IRA rules still apply to an annuity
Putting an annuity inside a traditional IRA does not make the distributions tax-free. Distributions are generally treated as ordinary income, subject to applicable tax rules. A Roth IRA annuity may be treated differently if the Roth distribution requirements are met. The calculator does not estimate federal or state tax, tax brackets, or the taxable portion of a distribution.
Traditional IRA owners generally must take required minimum distributions starting at age 73 under current law. The starting age rises to 75 in 2033 for people covered by that change. An annuity inside an IRA does not automatically eliminate RMD obligations. RMD calculation and satisfaction rules can depend on how the contract is held and structured. See the IRS RMD guidance and required minimum distributions explained.
The 2026 IRA contribution limit is $7,500, plus a $1,100 catch-up contribution for eligible people age 50 or older. These limits govern contributions to an IRA; they do not limit how much existing IRA money can be used to purchase an annuity. For an existing account’s distribution estimate, use the IRA withdrawal calculator or IRA payout calculator.
How the calculator projects income and balances
The annuity estimate applies the payout rate directly to the entered balance. If the joint survivor setting is selected, the model multiplies the result by 0.8. The systematic withdrawal begins with the entered withdrawal rate applied to the original IRA balance.
Annual annuity estimate = IRA balance × payout rate ÷ 100 × survivor factor
Monthly annuity estimate = annual annuity estimate ÷ 12
Starting withdrawal = IRA balance × withdrawal rate ÷ 100
For each withdrawal year, the model subtracts the scheduled withdrawal from the remaining balance, then applies the expected return to what remains. It limits a withdrawal to the available balance. Annuity payments and withdrawals are inflated only when a COLA is entered; the “today’s dollars” figures divide nominal income by the inflation factor for the number of years since the current age.
This is a simplified comparison. It does not model a specific insurer’s pricing, changing investment returns, fees, tax treatment, RMD calculations, or the value of an estate at a chosen date. The IRS guide to annuity income explains general tax treatment; confirm how a specific IRA contract is handled.
Questions to ask before choosing an option
Request a written illustration that identifies the guaranteed payment, any non-guaranteed assumptions, the payment period, survivor benefit, refund provision, inflation option, fees, and surrender terms. If the annuity is IRA-funded, ask how the contract satisfies required distributions and whether the selected payout schedule can produce an RMD shortfall.
Compare the annuity with a diversified withdrawal plan, not just the first-year dollar amount. A retirement withdrawal strategy calculator or retirement spend-down calculator can help assess how different withdrawals affect remaining assets. If the account includes inherited assets, review the separate inherited IRA tax calculator and distribution rules.
Is the annuity amount shown guaranteed?
No. The calculator applies an assumed payout rate to the IRA balance. A guarantee can only be determined from an insurer’s specific contract and illustration, subject to its terms and the insurer’s claims-paying ability.
Why does the model project through age 95?
The supplied calculator uses age 95 as its projection endpoint. It does not use a life-expectancy input, so the cumulative totals reflect that fixed horizon rather than a personalized longevity assumption.
Does the calculator include taxes?
No. Its displayed annuity and withdrawal amounts are before tax. Traditional IRA distributions are generally taxable as ordinary income, while qualified Roth IRA distributions may be tax-free. The result does not estimate your tax bill or compare after-tax income.
Does choosing joint survivor reduce the initial estimate?
Yes. In this model, selecting the joint-survivor option multiplies annuity income by 0.8, a 20% reduction. Real contract pricing varies; compare actual quotes and verify what percentage continues to the survivor.
Is a 4% withdrawal guaranteed to last?
No. The 4% figure is an input, not a guarantee. The modeled balance assumes a steady 6% return and a fixed withdrawal method; real returns can be uneven, and inflation or a longer retirement can change the outcome.
Should I annuitize the whole IRA or only part?
That is a tradeoff between guaranteed income and control of assets. Annuitizing a portion can provide an income floor while leaving some money liquid, but the suitability depends on essential expenses, other guaranteed income, health, and contract terms.
Does an IRA annuity avoid RMDs?
No. Holding an annuity in an IRA does not by itself remove applicable RMD requirements. Confirm the contract’s distribution mechanics with the custodian and insurer.
Compare contract illustrations and account rules with the calculator’s assumptions before using a payout estimate to plan retirement income.