Annuity Calculator
Grow an annuity through its accumulation phase to a future value.
Inputs
Additional contributions paid each month during accumulation.
The rate your annuity issuer credits; fixed or projected growth rate.
Variable annuity M&E and admin fees typically run 1–2%/yr. Fixed annuities are 0%.
When on, shows the drag a taxable account at the same rate would impose.
Annuity Value at End of Accumulation
$284,050
Total Premiums Paid
$170,000
Growth (Interest Credited)
$114,050
Net Return After Expenses
3.75%
Taxable Account Value (Comparison)
$242,921
Tax-Deferral Benefit
$41,129
Extra value versus a taxable account at your marginal rate.
Step by step
Net credited rate after expenses
5% − 1.25%
= 3.75%/year
Accumulation phase future value
FV($50,000 initial + $500/mo, 3.75%/yr, 20 yrs)
= $284,050
Total premiums paid
$50,000 + $500 × 240 months
= $170,000
Growth on investment
$284,050 − $170,000
= $114,050
Taxable account at same contribution
= $242,921
Tax deferral adds $41,129 compared to a taxable account at 22% tax rate.
How it works
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.
Formula
Future value with regular contributions
FV = Initial premium × (1 + net monthly rate)^months + Monthly premium × growth factor
- PV_0
- Initial premium
- PMT
- Monthly premium
- r_net
- Net monthly rate = (credited rate − expense ratio) / 12
- n
- Months in accumulation phase
Frequently Asked Questions
What is the M&E charge and why does it matter?
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.
Do fixed annuities have expense charges?
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.
When should I choose an annuity over a regular investment account?
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.
What happens after accumulation ends?
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.