Deferred Annuity Calculator

See how a deferred annuity grows during the accumulation phase, then calculate the fixed monthly payout once you begin annuitized withdrawals.

Quick Facts

Accumulation formula
FV = PV(1+i)^n + PMT[((1+i)^n - 1)/i]
Premium plus monthly contributions compound monthly during deferral.
Payout formula
Payment = FV × i / (1 − (1+i)^−n)
The accumulated balance is annuitized to zero over the payout period.

Your Results

Calculated
Accumulated value
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Balance when payout begins
Monthly payout
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Fixed payment during payout phase
Total payout
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Sum of all payments received
Total interest earned
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Growth across both phases

Ready

Enter your premium, contributions, deferral period, and rates, then press Calculate.

How the Deferred Annuity Calculator works

A deferred annuity has two distinct phases. First comes the accumulation (deferral) phase: you pay an initial premium and, optionally, ongoing monthly contributions, and the balance compounds at a fixed interest rate with no withdrawals. Then comes the payout (annuitization) phase: the accumulated balance is converted into a fixed stream of payments over a chosen number of years, using the same present-value annuity math that prices a term-certain payout.

The accumulation formula

Let PV be the initial premium, PMT the monthly contribution, i the monthly accumulation rate (annual rate ÷ 12), and n the number of months in the deferral period. The future value at the end of deferral is:

FV = PV × (1 + i)n + PMT × [((1 + i)n − 1) / i]

If there are no monthly contributions, this reduces to simple compound growth of the premium: FV = PV × (1 + i)n.

The payout formula

The accumulated value FV then becomes the principal for the payout phase. With i now the monthly payout rate and n the number of months in the payout period, the fixed monthly payment that draws the balance to zero is:

Payment = FV × i / (1 − (1 + i)−n)

If the payout rate is 0%, this reduces to Payment = FV / n — the balance simply split into equal installments.

Worked example

Start with a $20,000 premium plus $300 per month for 15 years of deferral at 6% annual interest. The balance at the end of deferral is about $136,327. Annuitized at 5% over a 20-year payout period, that balance supports a fixed payment of about $899.70 per month (240 payments), totaling roughly $215,928 — the $74,000 of contributions plus about $141,928 of interest earned across both phases.

What moves the numbers most

  • Deferral length: more years of compounding before payout begins has an outsized effect on the accumulated balance, since interest compounds on interest.
  • Accumulation rate: a higher crediting rate during deferral grows the balance faster than an equivalent increase in monthly contributions, especially over long horizons.
  • Payout rate and period: a higher payout-phase rate or a shorter payout period both raise the fixed monthly payment from the same accumulated balance.

Assumptions

This calculator assumes monthly compounding, ordinary-annuity timing (contributions and payments at the end of each month), and constant interest rates through each phase. Real annuity contracts may add fees, surrender charges, mortality credits, or rate changes that this pure interest-and-principal model does not capture — treat the output as a transparent baseline, not an insurer's quote.

Frequently Asked Questions

How is a deferred annuity calculated?
The calculation has two phases. During accumulation, an initial premium and monthly contributions grow at a fixed rate using FV = PV(1+i)^n + PMT[((1+i)^n - 1)/i], where i is the monthly interest rate and n is the number of months until payout begins. That future value then becomes the principal for the payout phase, where it is annuitized using Payment = FV x i / (1 - (1+i)^-n) so the balance reaches zero at the end of the payout period.
What is the difference between the accumulation and payout phases?
The accumulation (deferral) phase is when your premium and contributions earn interest and grow, with no withdrawals. The payout (annuitization) phase begins afterward, converting the accumulated balance into a fixed stream of payments over a chosen number of years. This calculator models both phases in sequence.
Can the accumulation and payout interest rates differ?
Yes, this calculator lets you set separate rates for each phase, since insurers may credit a different rate during accumulation than the rate used to annuitize the balance. Using the same rate for both phases is also a valid simplification if you want a single consistent assumption.
What happens if monthly contributions are zero?
With no ongoing contributions, the accumulation formula reduces to FV = PV(1+i)^n, meaning the initial premium simply compounds at the accumulation rate for the deferral period before being annuitized. This models a single-premium deferred annuity.

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