Fixed Annuities Calculations

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Fixed annuity calculations are based on several factors. These calculations can help determine how much you can save toward your retirement as well as the potential monthly income from the annuity once you begin withdrawing from this financial tool.

About Fixed Annuities

Fixed annuities are considered an insurance product. Money paid into the account is called a premium, the same term used to refer to money paid for an insurance policy. They're used primarily as retirement savings methods and are considered relatively low risk ways to save toward retirement. Premiums paid into the annuity yield an average interest rate of 3 percent to 15 percent over a three to fifteen year period, according to the Free Annuity Information site. The premium that you pay into the annuity locks in the rate at the time of purchase.

There are two types of fixed annuities: an immediate fixed annuity and a deferred fixed annuity. The difference between the two is how frequently the interest is paid. With an immediate annuity, payments are issued monthly after purchasing the annuity. With a deferred annuity, the issuer pays all of the interest earned at once at the end of the contract period.

Fixed Annuities Calculations

Making fixed annuity calculations is important if you're considering a fixed annuity. Review such calculations and compare them to the rate of interest and potential income from similar savings devices such as a bank-issued CD to determine if an annuity is a better option. Compare and contrast the various savings methods, your retirement goals, age and financial needs to determine which investment method is right for you.The formula for fixed annuities calculation is lengthy and complex. The easiest method to analyze a fixed annuity is to use one of the many free online calculators.

KJE Computer Solutions provides an online fixed annuity calculator that you can use to determine the potential income from your investment. To use the calculator, you'll need to type in certain information. Some of the required information is self-explanatory, such as your age and the initial investment you plan to make. For the current tax rate, use another calculator to figure out your marginal tax rate. You may have to guess at your retirement tax rate, but you can easily input various percents and combinations and see how each on stacks up. Type in your data, click calculate, and note the results.

Other Calculators to Try

If you'd like to use different fixed annuities calculations online, here are some other resources to try:

  • Immediate Annuities features a simpler version of the fixed annuity calculator, but note that the simple version may not yield as accurate results.
  • New Retirement features an annuities calculator that's more like a questionnaire, so if the others ones seem too complicated, try this one. It may be easier for those not used to insurance and investment instruments.

Benefits of Fixed Annuities

Fixed annuities offer many potential benefits. Generally, you don't pay tax on the money earned during the contract period, just when you take it out of the annuity. Fixed annuities tend to be steady and stable and offer a low-risk method of investment. They typically protect against inflation by locking in a rate for the duration of the annuity. The low risk and inflation protection offer attractive alternatives to mutual funds and stocks; such investments may be difficult for people near retirement age to count on since they can fluctuate so much.

For more information about retirement planning, seek advice from a certified financial planner.

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Fixed Annuities Calculations