Grow an annuity through its accumulation phase to a future value.
During the accumulation phase a deferred annuity works like any tax-deferred investment: premiums compound and you don't owe tax until withdrawal. The expense ratio (mortality & expense charges plus admin fees) is deducted from the credited rate to arrive at your actual net return. The tax-deferral comparison shows how much more you accumulate versus a taxable account where investment income is taxed each year — the advantage grows with time and your tax rate.
Future value with regular contributions
FV = Initial premium × (1 + net monthly rate)^months + Monthly premium × growth factor
Mortality & Expense (M&E) risk charges and administrative fees are deducted annually from variable annuity sub-accounts, typically 1–2%. Because they compound against you over time, a 1.5% drag on a 7% gross return leaves you with only 5.5% — reducing the final balance significantly over 20+ years.
Fixed annuities quote a net credited rate, so there's no separate deduction — the insurer absorbs costs internally. Set the expense ratio to 0% for fixed annuities and enter the guaranteed credited rate directly.
Annuities make most sense after maxing out 401(k) and IRA contributions, when you want tax-deferred growth on after-tax dollars and guaranteed income in retirement. The tax deferral benefit shown here quantifies the advantage. If your time horizon is short, high fees can outweigh the deferral benefit.
Use the Annuity Payout Calculator to model the income phase: the accumulated value is converted into regular payments either for a fixed period or for life.