Immediate Annuity Calculator — Estimate Guaranteed Lifetime Income (2025)

Our calculator provides highly accurate estimates using current 2025 mortality tables and interest rates (5.0-6.5%). However, actual insurance company quotes may vary 2-5% based on their specific underwriting, internal costs, and current pricing algorithms. Always get multiple quotes to compare. Use our calculator as a baseline for evaluating quotes—if an insurer's quote is more than 5% different, question why.

It depends on your payout option: Single Life Only = payments stop, nothing for heirs (highest payments). Life with Period Certain = beneficiaries receive payments through the guaranteed period. Joint Life = spouse continues receiving payments for life. Period Certain Only = beneficiaries receive remaining payments if you die during the term. You trade higher payments for beneficiary protection.

You permanently lose access to your principal—this is the main 'risk' of annuitization. Other risks include: Insurance company default (choose A-rated companies), inflation eroding purchasing power (consider inflation riders), dying early (period certain helps), and opportunity cost (money can't be invested elsewhere). There's no market risk to payments, but you lose flexibility forever.

Immediate annuities start payments within 12 months—ideal for retirees converting savings to income now. Deferred annuities delay payments 5-30 years—you invest now for higher future payments. Choose immediate if you need income now in retirement. Choose deferred if you're 45-60 and want to guarantee higher future income. Some people use both: immediate for now, deferred for later.

Interest rates directly impact payments—a 1% rate increase typically boosts payments 8-12%. Timing matters but shouldn't drive short-term decisions. Consider dollar-cost averaging: buy annuities in stages over 2-3 years rather than all at once. This captures rate changes and provides flexibility. Don't try to perfectly time rates; focus on your need for guaranteed income. Current 2025 rates (5.0-6.5%) are historically attractive.

Taxation depends on funding source: Non-qualified (after-tax money) = only the interest portion is taxable, calculated via 'exclusion ratio.' Qualified (IRA/401k funds) = 100% taxable as ordinary income. Minimize taxes by: Using non-qualified funds when possible, considering a Roth conversion before annuitizing, and splitting purchases across taxable years. Consult a tax advisor—annuity taxation is complex and situation-specific.

Immediate annuity commissions typically range 1-3% of your premium, built into the quoted payment rate (not an added fee). A $100,000 annuity might have $1,000-3,000 in commission. These are generally not negotiable—agents earn this for servicing your contract long-term. Focus on the net payment to you, not the commission. Independent agents can shop multiple companies, potentially finding better rates than captive agents.

Optimal purchase age is typically 65-75. Earlier purchases (age 60) mean lower payments and longer inflation risk. Later purchases (age 75+) provide much higher payments (age 75 gets ~50% more than age 65) but less time to enjoy income. Consider your health, family longevity, and income needs. Many retirees purchase between ages 65-70 when converting 401k/IRA savings. Delaying Social Security until 70 while using annuity income age 65-70 can be an optimal strategy.