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How To Use the Fixed Annuity Calculator
To use this fixed annuity calculator, simply fill out the fields with information about yourself and your fixed annuity. You’ll input details including your current age and tax rate as well as the age and tax rate you’ll be at when you intend to start withdrawing from your annuity.
The calculator also requires information about your fixed annuity, like the starting balance, initial interest rate, expected average interest rate and minimum guaranteed rate. You can also input the surrender charge schedule of the annuity.
When you click the “calculate” button to submit your information, the calculator will show you the expected value of your fixed annuity at the time of withdrawal. This estimate assumes the expected average interest rate that you entered.
The calculator also displays a graph showing how your annuity grows over the specified period. The three lines on the graph represent the expected annuity value as well as the minimum value and the amount of the annuity that is taxable.
This calculator incorporates a number of important variables and concepts, including the time value of money. This fundamental financial concept asserts that a dollar today is worth more than a dollar tomorrow, given its ability to earn interest and grow over time.
What Can a Fixed Annuity Calculator Tell You
The purpose of the fixed annuity calculator is to help you estimate how much your fixed annuity contract will grow over time.
Predictability is one of the big advantages of a fixed annuity. Because the rate of return is guaranteed for a certain period of time, you can figure out exactly how much your contract’s value will be after those years.
The calculator can also help you compare the terms of different fixed annuities to find which one would be most beneficial to you. If you’re considering a few different products, try plugging in the interest rates and other details of each one to see which annuity will grow your premium investment by the greatest amount.
Limitations and Considerations
Though a fixed annuity calculator can be a valuable tool in understanding how these annuities work, there are some limitations to consider when using it.
The biggest limitation of the fixed annuity calculator is that it cannot predict how a fixed annuity’s interest rate might change over the contract’s term. The initial interest rate of a fixed annuity is usually only guaranteed for the first year or first few years of the contract.
After that, the insurance company can change the annuity’s interest rate monthly, quarterly, semiannually or annually. This makes predicting the eventual growth of a fixed annuity a bit more tricky, though they are still more reliable than other types of annuities like variable annuities.
The calculator also lacks the ability to compare the growth of fixed annuities to that of other types of annuities. An investor who wants to balance risk with growth potential might want to look at the projected growth of a fixed annuity alongside that of an indexed or variable annuity. These other types of annuities may not offer the same guaranteed returns as a fixed annuity, but their potential for gains tends to be higher.
As with any major financial decision, consulting with a financial advisor can help you better understand how a fixed annuity can fit into your investment strategy. A financial advisor can provide you with personalized recommendations and information about fixed annuities and other products that may be beneficial to you.
Frequently Asked Questions About Fixed Annuities
A fixed annuity is an insurance product that accumulates interest at a fixed rate on a lump sum premium before converting the principal and interest into a guaranteed income stream.
A fixed annuity’s payout is affected by the interest rate, the length of the accumulation phase and the annuitant’s life expectancy.
A $100,000 fixed annuity with a 4.5% interest rate and a 10-year maturity period could pay as much as $926.07 per month for a 65-year-old man or $802.59 for a 65-year-old woman.
The pros of fixed annuities are that the income is predictable and the risk of losing money is extremely low. The cons of fixed annuities are that their growth potential is lower than other types of annuities and may not keep pace with inflation.