Immediate Annuity Calculator
Find out how much monthly income you'll receive from an immediate annuity.
💰 What is an Immediate Annuity?
An immediate annuity, also called a Single Premium Immediate Annuity (SPIA), is an insurance contract you purchase with a single lump-sum payment that begins paying guaranteed income almost immediately - typically within 30 days of purchase. You give the insurance company your premium, and in return you receive a guaranteed stream of payments for either a specified number of years (period-certain) or for the rest of your life (life annuity). Immediate annuities are the simplest and most efficient way to convert accumulated savings into predictable retirement income.
The appeal of an immediate annuity is certainty: unlike withdrawing from an investment portfolio, you cannot outlive your income or suffer from sequence-of-returns risk. The insurance company bears both the investment risk (guaranteeing the payout regardless of market performance) and the longevity risk (continuing payments even if you live to 100). In exchange for this certainty, you surrender liquidity - once purchased, most immediate annuities cannot be surrendered or redeemed for the original premium.
Immediate annuity payout rates are heavily influenced by prevailing interest rates. When interest rates are high (as in 2022–2024), annuity payouts are more attractive because the insurer can invest your premium at higher rates and pass on better income. Understanding the payout calculation - which is simply the standard loan amortization formula applied in reverse - helps you compare offers from different insurers and determine whether an immediate annuity fits your retirement income plan.
📐 Immediate Annuity Formula
This is identical to the mortgage payment formula - the insurance company is essentially "amortizing" your lump sum over the payout period. A higher rate r produces a higher monthly payment; a longer payout period n produces a lower monthly payment. For life annuities, actual payouts depend on actuarial tables and the insurer's profit margin, but this formula provides a close approximation.
📖 How to Use This Calculator
Steps
💡 Example Calculations
Example 1 - $200,000 at 5% for 20 Years
Premium = $200,000 | Rate = 5% | 20 years
Example 2 - $500,000 at 5.5% for 25 Years
Premium = $500,000 | Rate = 5.5% | 25 years
❓ Frequently Asked Questions
🔗 Related Calculators
What is an immediate annuity (SPIA)?
A Single Premium Immediate Annuity (SPIA) is an insurance contract you purchase with a lump sum that immediately begins paying guaranteed income - typically within 30 days of purchase. You pay the insurer once and receive fixed monthly (or quarterly/annual) payments for either a set number of years (period-certain) or for the rest of your life (life annuity). SPIAs are the simplest and most efficient way to convert savings into guaranteed retirement income.
How much monthly income does $100,000 generate?
At a 5% annual rate over 20 years, $100,000 generates approximately $660/month. A life annuity payout depends on age and gender (actuarial factors) - for a 65-year-old male, $100,000 might generate $550–$650/month for life (as of mid-2026). Actual payout rates vary by insurer, your age, current interest rates, and the type of payout chosen.
What is the difference between life annuity and period-certain annuity?
A life annuity pays income for as long as you live, no matter how long. If you die one month after purchase, payments stop (unless you added a period-certain feature). A period-certain annuity guarantees payments for a specified number of years (e.g., 10, 20, 25 years), regardless of whether you are alive - if you die before the term ends, payments continue to your beneficiary. Life annuities pay more per month but carry longevity risk for the insurer.
When should I buy an immediate annuity?
An immediate annuity is most valuable when: you're retired and need guaranteed income now; you lack a pension and want longevity protection; interest rates are relatively high (locking in better payouts); you've reached age 70–75 (older buyers get better rates due to shorter expected lifespan); or you want to simplify retirement income and eliminate sequence-of-returns risk. It's less suitable if you need liquidity or anticipate large near-term expenses.
Are immediate annuity payments taxable?
For a non-qualified immediate annuity (purchased with after-tax funds), each payment consists of a taxable interest portion and a tax-free return-of-principal portion - the exclusion ratio determines the split. For a qualified immediate annuity (purchased with IRA/401k funds), the entire payment is taxable as ordinary income. Consult a tax advisor for the exact exclusion ratio for your specific annuity.
What is the difference between an immediate and deferred annuity?
An immediate annuity starts income payments within one month of a lump sum purchase. A deferred annuity accumulates for a period before income begins. Immediate annuities suit retirees who need income now; deferred annuities suit those still accumulating but want to lock in an income start date.
Which insurer offers the best immediate annuity rates in India?
Compare LIC, SBI Life, HDFC Life, ICICI Prudential, Bajaj Allianz, and Tata AIA. Rates change quarterly. LIC traditionally offers slightly lower rates but with government backing. Private insurers may offer 0.25-0.5% higher rates. Always compare quotes from at least 3 insurers and factor in annuity type (with or without return of purchase price).
Can I surrender an immediate annuity?
Most immediate annuity contracts are irrevocable - once purchased, you cannot surrender or get a refund. This is a key risk: you lose liquidity. Some insurers offer a surrender value in exceptional cases like critical illness, but at a significant penalty. Thoroughly evaluate your liquidity needs before converting a large lump sum into an immediate annuity.