How Do You Calculate Your Expected Annuity?


Quick Answer

Using an annuity calculator, you can receive an estimate of your expected annuity according to factors such as the amount you plan to invest and the estimated length of retirement, explains New Retirement. Financial advisers often recommend investing in a lifetime annuity, which guarantees an income stream for the rest of your life, rather than a term annuity, which only guarantees payment for a specified length of time, such as five, 10 or 20 years.

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How Do You Calculate Your Expected Annuity?
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Full Answer

If you know the precise amount of money you are investing, an annuity calculator can tell you how much monthly income you can expect during retirement, says New Retirement. Conversely, if you know there is likely to be an income gap between your expenses during retirement and your Social Security or other retirement income, an annuity calculator can tell you the amount of money you need to invest to fill that gap. When choosing an annuity, it is important to consider that inflation causes expenses to rise over the course of a long retirement, so it is beneficial to invest in an annuity that includes an annual cost of living adjustment. Some annuities provide lifelong benefits for a surviving spouse after the retiree's death, and this type of annuity is preferable for many married couples.

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