Plan Your Retirement with Confidence
Planning for a secure retirement means knowing exactly how long your money will last. An annuity is a powerful tool designed to provide a reliable income stream, but it's crucial to understand its limits. This calculator removes the guesswork, showing you a precise forecast of your annuity's longevity based on your principal, growth rate, and withdrawal plan. By seeing how different scenarios play out, you can make informed decisions to ensure your financial stability for years to come.
How to Use This Calculator: A Step-by-Step Guide
- Enter Annuity Details: Start by inputting your total Annuity Starting Principal (the lump sum you've invested) and the expected Annual Interest Rate. This rate is the annual growth your principal is projected to earn.
- Define Your Payouts: Specify the Payout per Period, which is the amount you plan to withdraw each time. Then, choose the Payout Frequency—whether you'll receive payments monthly, quarterly, or annually.
- Select Payout Timing: Choose whether payments occur at the End of Period (Ordinary Annuity) or the Beginning of Period (Annuity Due). This choice slightly affects how interest is calculated.
- Factor in Inflation (Optional but Recommended): Enter an Expected Inflation Rate to see how the purchasing power of your payouts may decrease over time. This gives you a true sense of your future financial standing.
- Calculate and Analyze: Click the "Calculate" button. The tool will instantly show you how many years and months your funds will last, along with a detailed summary, a visual chart of your balance over time, and a full amortization schedule.
Frequently Asked Questions (FAQ)
What is an annuity?
An annuity is a contract between you and an insurance company where you make a lump-sum payment or series of payments, and in return, receive regular disbursements, beginning either immediately or at some point in the future. The goal is to provide a steady stream of income, typically during retirement.
What does 'Payout Timing' mean?
This refers to when you receive your payment within a period. An 'annuity due' makes payments at the beginning of each period, while an 'ordinary annuity' makes payments at the end. Payments at the beginning mean the remaining balance has slightly less time to accrue interest, which can affect how long the annuity lasts.
What happens if the interest earned is more than the payout?
If your annuity's interest rate is high enough that the interest earned each period is greater than your withdrawal amount, the principal will never decrease. This is called a perpetual annuity. In this scenario, the annuity will last forever, and your balance may even continue to grow. Our calculator will notify you if this is the case.
Can an annuity run out of money?
Yes, a standard fixed-period annuity can run out of money if your withdrawals, combined with fees, are greater than the interest earned over time. This calculator is designed to show you exactly when that will happen based on your inputs. A 'life annuity' product, however, guarantees payments for as long as you live.
How does inflation affect my annuity?
Inflation reduces the purchasing power of your money over time. A $3,000 monthly payout today will buy less in 10 or 20 years. By entering an expected inflation rate, our calculator can help you understand the 'real value' of your future income, giving you a more accurate picture of your financial security.