Annuity Simulator

Written & fact-checked by the CoverFormula editorial team · Last reviewed 2026-08-27

What This Simulator Does

An income annuity converts a lump sum into a stream of guaranteed payments for life. This tool simulates roughly how large that monthly payment could be for a premium, age, and payout option you choose. It covers single-premium immediate annuities (income starts now) and deferred income annuities (you fund it now, income starts later). It does not model variable annuities, indexed annuities, or products with cash-value withdrawal features.

How the Estimate Is Built

For an immediate annuity, the simulator multiplies your premium by an annual payout rate that depends on the age income begins — using anchor points at ages 60, 65, 70, 75 and 80 and interpolating between them — then adjusts for sex (women receive slightly lower payments because they live longer on average) and for the payout option, and divides by 12. For a deferred annuity, it first grows the premium at your assumed annual rate from your current age to the income start age, then applies the payout rate at that later age. The "years to recoup" figure divides the premium by the annual income, showing how long payments must continue before you have received your original money back.

Estimate only. Real annuity quotes change daily with interest rates and vary significantly between insurers. A payout rate is not an investment return — every payment is part return of your own principal, part interest, part mortality credit. Always compare firm quotes from multiple A-rated carriers before buying.

Formula

Immediate:  Annual income ≈ Premium × payoutRate(startAge) × sexFactor × optionFactor
Deferred:   Value at start = Premium × (1 + growthRate)^(startAge − currentAge)
            Annual income ≈ Value at start × payoutRate(startAge) × sexFactor × optionFactor
Monthly income = Annual income ÷ 12

payoutRate  = 5.8% (60) · 6.5% (65) · 7.4% (70) · 8.7% (75) · 10.5% (80), interpolated
sexFactor   = 1.00 male · 0.94 female
optionFactor= 1.00 single life · 0.97 life w/ 10-yr certain · 0.86 joint life

How to Use This Simulator

Enter the premium you would place in the annuity.
Enter your current age and the age you want income to begin — set them equal for an immediate annuity.
Choose sex and a payout option.
For a deferred annuity, set the assumed growth rate for the funding period.
Click Simulate Income to see the estimated monthly and annual income, the payout rate used, and the years-to-recoup figure.

Frequently Asked Questions

How does this annuity simulator estimate monthly income?

For an immediate annuity it multiplies your premium by an annual payout rate that rises with the age income begins, then adjusts for sex and payout option and divides by 12. For a deferred annuity it first grows the premium at an assumed annual rate until the income start age, then applies the payout rate at that age. Payout rates are rules of thumb based on typical single-premium immediate annuity pricing, not live insurer quotes.

Why does waiting to start income raise the monthly payment so much?

Two effects stack. The premium has more years to grow before payments begin, and the insurer spreads the payout over a shorter expected lifespan, so the payout rate itself is higher at older start ages. Together these can roughly double the monthly income between starting at 60 and starting at 75.

What does life with 10-year certain mean?

It pays for as long as you live, but guarantees at least 10 years of payments to a beneficiary if you die early. That guarantee slightly lowers the monthly amount versus a straight single-life annuity, which stops entirely at death.

Is an annuity payout rate the same as investment return?

No. A payout rate blends return of your own principal with interest and a mortality credit, so a 7% payout rate does not mean a 7% return. Part of every check is your own money coming back. Compare annuities on guaranteed income for the premium, not on payout rate alone.

Simulate Your Annuity Income