A deferred fixed annuity does two jobs. During the deferral years it works like a long-term savings vehicle, crediting a guaranteed rate and deferring tax on the interest. Later, it can turn the accumulated value into a dependable stream of income. This calculator follows the money through both phases, showing the contract value when payouts begin and the level payment it can support for the period you choose.
How to use the deferred annuity calculator
- Enter the initial premium and, for flexible-premium contracts, an optional amount added each year.
- Enter the guaranteed rate credited during deferral and the number of years before payouts start.
- Enter the payout period in years and the payment frequency.
- Optionally enter a different rate during payouts; leave it blank to keep the guaranteed rate.
- Choose whether each payment comes at the end or beginning of its period.
The chart traces the contract value rising through deferral and falling to zero by the final payment; the table shows each year’s premiums, interest and payouts.
Deferred annuity formulas
Accumulation. With premium P, yearly additions A, rate g and d deferral years:
Payout. The value V is paid out over n payments at a periodic rate r = (1 + payout rate)1/f − 1, with f payments a year:
For payments at the start of each period, divide by (1 + r).
Worked example
At 57 you place $100,000 in a fixed annuity guaranteeing 5% a year, defer for 10 years, then take monthly income for 20 years at the same rate.
- Value at 67: $100,000 × 1.0510 = $162,889.46
- Monthly rate: 1.051/12 − 1 = 0.40741%; 240 payments
- Monthly income: $1,065.03
- Total income: $255,607.37 — $100,000 of premium, $62,889.46 of interest earned while deferring and $92,717.91 earned during the payout years
How the deferral period changes income
Same $100,000 premium, 5% rate and 20-year monthly payout:
| Years deferred | Value at payout start | Monthly income |
|---|---|---|
| 0 (immediate) | $100,000.00 | $653.84 |
| 5 | $127,628.16 | $834.48 |
| 10 | $162,889.46 | $1,065.03 |
| 15 | $207,892.82 | $1,359.28 |
| 20 | $265,329.77 | $1,734.82 |
Each extra five years of deferral raises income by about 28% here, because the value compounds before any money is paid out. Adding $5,000 a year during the 10-year deferral lifts the starting value to $225,778.93 and monthly income to $1,476.22.
Annuities vs. other options
A multi-year guaranteed annuity is often compared with a CD. Both lock a rate, but the annuity defers tax on interest until withdrawal, while CD interest is taxed every year. On the other hand, annuities are backed by the insurer’s claims-paying ability and state guaranty associations rather than FDIC insurance, they carry surrender charges, and early withdrawals of earnings can trigger an IRS 10% additional tax before age 59½. Annuity rules are governed by each state’s insurance regulator.
For the math behind the payout phase on its own, see the present value of annuity calculator. To see how the annuity fits a broader plan, try the retirement savings calculator.
Illustrative estimates only, not financial, tax or insurance advice. Actual contracts include fees, rate terms and surrender schedules that change the results; rely on the insurer's contract and disclosures.
Frequently asked questions
What is a deferred fixed annuity?
It is an insurance contract that credits a guaranteed interest rate for a set period, letting earnings grow tax-deferred, and can later be converted into a stream of payments. Multi-year guaranteed annuities (MYGAs) lock one rate for the whole guarantee period, much like a CD.
How is the payout calculated?
The calculator treats the contract value at the end of the deferral period as a loan to be repaid to you in equal installments: payment = value × r ÷ [1 − (1 + r)^−n], where r is the rate per payment period and n the number of payments.
Is this the same as a lifetime annuity quote?
No. This models a period-certain payout that ends after the number of years you choose. Lifetime income depends on the insurer's mortality assumptions, your age and sex, and its pricing, so request an actual quote for that.
How are deferred annuities taxed?
For a nonqualified annuity bought with after-tax money, earnings are not taxed until withdrawn and are then taxed as ordinary income; withdrawals before age 59½ may also face a 10% IRS additional tax. Annuity payments are split into a tax-free return of premium and taxable earnings.
What are surrender charges?
Most deferred annuities charge a declining fee if you withdraw more than a free amount (often 10% a year) during the first several contract years. The calculator assumes you keep the contract to the payout phase, so it does not apply them.