Retirement Annuity Calculator: Estimate Income From an Annuity
Use this guide to understand the assumptions, inputs, results, and next steps behind the calculator.
Created by Luis Gonzalez · Last updated August 29, 2026
An annuity exchanges a premium for payments under a contract. A retirement annuity calculator estimates the income a purchase could provide, when payments begin, how long they may be paid, and how the projected payout compares with keeping the money invested. The result depends on the payout rate, payment start date, annual increases, tax assumption, and contract guarantees.
With the default $200,000 purchase, age 60 current age, age 65 start age, and 5.5% payout rate, the calculator estimates $917 monthly gross income and $715 monthly after tax. It projects total payouts of $352,333 through age 90, with a reported break-even age of 81. These are estimates based on the inputs—not insurer quotes or guarantees of a specific product.
Enter the Purchase, Start Age, and Payout Assumptions
Enter the amount available for the annuity, your current age, and the age payments begin. If payments begin later, the calculator models a deferral period. Add a payout rate, guaranteed period, annual payment increase, life expectancy, inflation, alternative investment return, and assumed tax rate.
A payout rate is the initial annual payment as a percentage of the purchase amount in this model. It is not the same as an investment return: an annuity payment can include a return of principal, and the contract’s value may not be available for withdrawal after purchase. A lifetime annuity calculator or immediate annuity calculator can help you examine other payout structures.
Default Example: $200,000 Purchase at a 5.5% Payout Rate
The default inputs produce an initial annual payout of $11,000. Monthly income is the annual amount divided by 12. Applying the 22% assumed tax rate gives the displayed after-tax estimate:
Annual income = purchase amount × payout rate
= $200,000 × 5.5%
= $11,000
Gross monthly income = annual income ÷ 12
= $11,000 ÷ 12
= $916.67
≈ $917
After-tax annual income = annual income × (1 − tax rate)
= $11,000 × (1 − 0.22)
= $8,580
After-tax monthly income = $8,580 ÷ 12
= $715
The calculator assumes five years of deferral, from age 60 until payments start at 65. Payments then rise by 2% per year. It projects $352,333 total gross payouts, $274,820 total after-tax payouts, and a 76% total return over the original purchase amount when comparing nominal cumulative payouts with the premium. That return figure is not an annual investment return.
The reported break-even age is 81, or 21 years after the current age. The calculator’s break-even test compares cumulative gross payouts with the $200,000 purchase. It does not account for the time value of money, the value of remaining assets, or the insurer’s financial strength.
The alternative investment comparison assumes a 7% annual return. In the default output, the alternative account balance at age 90 is $689,349, while modeled after-tax annuity payouts total $274,820. This does not mean a 7% return is assured; it illustrates how results change under the specified alternative-return assumption.
| Scenario to test | Purchase | Payout rate | Annual increase | What it changes |
|---|---|---|---|---|
| Lower premium / lower initial income | $150,000 | 4.8% | 2% | Tests whether smaller guaranteed income meets a smaller need |
| Higher payout assumption | $250,000 | 6.0% | 0% | Tests larger initial income without annual increases |
| Earlier start | $200,000 | 5.2% | 1% | Tests payments beginning sooner with a lower payout rate |
| Longer deferral | $200,000 | 5.8% | 2% | Tests a later payment start and a different initial payout assumption |
These are input scenarios, not insurer offers. Request quotes using the same premium, payment start age, survivor option, and guarantee period to compare real contracts.
Immediate, Deferred, and Lifetime Income Tradeoffs
An immediate annuity generally starts payments soon after purchase. A deferred income annuity begins later, often to provide income in advanced age. A fixed lifetime payment can help cover essential expenses, but it may reduce liquidity and leave less of the original premium available to heirs, depending on the selected guarantee or refund feature.
The default scenario defers payments for five years. The alternative account grows during that period at the assumed 7% rate; the model reports a balance of $280,510 at the start of payments. That balance depends on a steady annual return and does not include taxes or investment volatility.
An annual increase can help offset inflation, but it commonly reduces the initial payment compared with a level-payment option. In the default projection, nominal annual payout rises to $17,693 at age 90, while its inflation-adjusted value is estimated at $8,435. This shows why a rising nominal payment does not necessarily keep pace with purchasing-power loss. Compare the result with an investment annuity calculator or a broader annuity calculator.
| Payout design | Main benefit | Main tradeoff |
|---|---|---|
| Level payment | Higher starting payment may be available | Buying power declines with inflation |
| Payment with annual increase | Payments rise over time | Initial income may be lower |
| Period-certain guarantee | Payments continue for a stated period to a beneficiary if applicable | Guarantee terms affect payment size |
| Lifetime income | Transfers longevity risk for covered payments | Liquidity and legacy value may be reduced |
Actual contract terms vary. The calculator’s guaranteed-period input does not fully model all survivor, refund, or joint-life options. Review the contract and insurer quote rather than assuming the modeled payment includes every protection.
Tax Assumptions and Important Limits
The calculator applies the tax-rate input to each annuity payout and alternative withdrawal. In the default example, the assumed tax rate is 22%. Actual taxation depends on how the annuity is funded. Qualified annuity payments are generally taxable as ordinary income; nonqualified annuities may have a taxable portion and a return-of-investment portion under applicable rules. State tax may also apply.
The IRS describes annuity taxation in Publication 575. Do not apply the calculator’s single tax rate as a personalized tax calculation. For retirement income from multiple sources, consider how annuity payments interact with Social Security, pensions, and taxable account withdrawals. See how to withdraw from retirement accounts tax-efficiently and compare a retirement withdrawal calculator.
The model’s payout estimate is driven by the entered payout rate, not by an insurer’s current pricing formula. Insurer quotes can vary by age, sex where permitted, state, payment option, interest rates, product type, and financial strength. A fixed annuity’s contractual guarantees depend on the issuing insurance company and contract provisions. An annuity is not a bank deposit and is not insured by the FDIC.
How the Calculator Estimates Payouts
The model calculates an initial annual payment from the purchase amount and payout rate, then applies the annual increase after payments begin. It compares cumulative payments with the original premium for the break-even age and separately projects an alternative account balance.
Deferral years = maximum of 0 and (annuity start age − current age)
= 65 − 60
= 5 years
Annual payout in payout year n =
initial annual income × (1 + annual increase)^(n − 1)
After-tax payment = gross payment × (1 − assumed tax rate)
= gross payment × (1 − 22%)
Alternative balance during a year =
prior balance × (1 + alternative return)
− modeled withdrawal
In the default comparison, the alternative portfolio is assumed to earn 7% each year and withdrawals begin when annuity payments start. The model withdraws an amount equal to the annuity’s gross payout, capped at the available balance. Actual portfolio results are uncertain and can differ greatly from a smooth annual-return assumption.
Next Steps: Compare Quotes on Identical Terms
Decide how much essential income you want guaranteed, how much liquidity you need, and whether inflation protection or beneficiary payments matter. Request multiple insurer quotes using identical start ages, payout increases, and guarantee terms. Compare those quotes with a lifetime annuity calculator, IRA annuity calculator, and a retirement cash-flow projection before committing a large share of savings.
Frequently Asked Questions
Quick answers to the questions people usually have after running the retirement calculator.
1How much monthly income does the default annuity estimate?
The default inputs estimate $917 monthly gross income and $715 monthly after tax. The calculation uses a $200,000 premium, 5.5% payout rate, and 22% tax assumption. A real insurer quote may produce a different payment.
2What does “break-even age 81” mean?
It means cumulative nominal gross payouts reach the original $200,000 purchase amount at the calculator’s reported age 81. It does not account for investment growth on the premium, inflation, taxes, or the value of any remaining account balance. It is one comparison point, not a measure of whether a contract is suitable.
3Is the 5.5% payout rate an investment return?
No; it is the initial annual payment divided by the purchase amount in this calculator. Payments may include principal as well as earnings. Do not compare the payout rate directly with a portfolio’s annual investment return.
4Should I buy an annuity or keep the money invested?
An annuity can provide contract-based income and transfer some longevity risk, while an investment portfolio can retain liquidity and potential growth but exposes you to market and withdrawal risk. Compare the amount of essential expenses covered, fees, inflation protection, guarantees, tax treatment, and the effect on your estate. A deferred income annuity calculator can help assess a later-life income option.
5Does the guaranteed period ensure I get the purchase price back?
No; a period certain generally describes how long payments continue under specified contract terms, including payments to a beneficiary if the annuitant dies during that period. It does not automatically guarantee return of the full premium. Confirm refund and survivor provisions in the contract.
6Does the after-tax estimate apply to every annuity?
No; the calculator uses a single tax rate for an estimate. Qualified and nonqualified annuities can have different tax treatment, and a nonqualified contract may have taxable and nontaxable portions. See IRS Publication 575 and confirm with a tax professional.
7Why does the alternative investment balance remain high in the default results?
The comparison assumes a 7% annual return and applies withdrawals based on the modeled annuity payout. Under that smooth-return assumption, the displayed age-90 alternative balance is $689,349. Real investment returns fluctuate, and withdrawals during a downturn can reduce portfolio longevity.