How Are Annuity Quotes Calculated?


Quick Answer

Annuity quotes are calculated by taking the initial investment made and adjusting that sum by adding a five percent interest rate with each payment. The initial investment and the interest adjustment payments together in order to understand how much will be available in the annuity. To calculate how much money is paid out of an annuity monthly, use CNN Money's annuity calculator. Begin by using the drop down menu to indicate the state, gender and age of the investor.

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How Are Annuity Quotes Calculated?
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Full Answer

Continue using the annuity calculator by entering the lump sum of the annuity. Press the Get Result button to calculate the estimated monthly payment to the investor.

When paying into an annuity, payment may be required at either the beginning or the end of the payment period. When required at the end of the period, it is considered an ordinary annuity. When required at the beginning of the period, it is dubbed annuity due.

There are two types of annuities that pay out. Immediate annuities begin to pay out directly following the investment; these annuities are popular with individuals who have reached their retirement years. Deferred annuities begin to collect interest upon investment. When the investor chooses, it can be changed to an immediate annuity for pay outs to begin. Annuities are either fixed or variable, according to whether the payout is fixed from an initial investment or dependent on the stock market's performance.

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