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Updated January, 2024

Fixed Annuity Calculator

A Fixed Annuity can provide a very secure, tax-deferred investment. It can provide a guaranteed minimum interest rate, with no taxes due on any earnings until they are withdrawn from the account. Use this calculator to help you determine how a Fixed Annuity might fit into your retirement plan.

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For more information about these financial calculators please visit: Financial Calculators from KJE Computer Solutions, Inc.

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

What is a fixed annuity?

A fixed annuity is a two-part savings vehicle offered by insurance companies. In the first part, called the accumulation phase, the annuity pays a fixed rate of interest for a set period, much like a bank certificate of deposit. Currently, three-year fixed annuities pay up to 5.65 percent, according to, while 10-year fixed annuities pay up to 5.45 percent. Fixed annuities feature a minimum rate — typically 1 percent to 3 percent — that they will pay each year, even if interest rates fall below that level. Interest on your earnings is tax-deferred until you start taking withdrawals. 

The second part of the fixed annuity is the distribution phase. Typically, you can have your entire amount paid out at once, over your lifetime or for a set period — say, 10 years. If you choose a lifetime payout, you’ll get the same amount each month no matter how long you live. In some forms of fixed annuities, however, the insurance company will get any leftover money if you die earlier than projected. You can also get annuities that will pay your beneficiaries after you die. 

This calculation assumes you have a nonqualified annuity, which means you’ve already paid taxes on the money you invest, and the earnings are tax-deferred until you withdraw at retirement. Be aware that a fixed annuity is a contract between you and the insurance company, and each company’s annuity contract will be different. It’s important to read the contract and make sure that all its provisions are in line with your goals. 

How is a fixed annuity taxed?

When you take distributions from a nonqualified fixed annuity, you’ll be taxed on the deferred earnings in each payment. For annuities with lifetime payouts, the payment contains part principal, which isn’t taxed, and part earnings, which are taxed. For those set to last a certain time — say, 10 years — the earnings and interest are paid first, and you pay taxes on those. The remaining principal payments are not taxed. 

As with individual retirement accounts (IRAs), you pay a 10 percent penalty on any withdrawals you take before you reach age 59½. This is in addition to the income tax you pay on the taxable part of your withdrawals. If you have an annuity in an IRA, you’ll have to start taking required minimum distributions by April of the year after you turn 73. 

What are surrender fees?

You may incur surrender fees if you take withdrawals during the surrender period, which is typically six to eight years after you purchase the annuity. The typical penalty is about 7 percent of the amount you withdraw, which declines each year to zero by the end of the surrender period. Many insurance companies will allow you withdraw up to 10 percent of your annuity without a surrender fee. Some annuities also waive surrender charges for people who live in nursing homes or have a terminal illness.

What other fees come with fixed annuities?

Your insurance agent may get a commission for selling you a fixed annuity. Commissions vary widely and are typically built into the cost of the annuity (and might not be spelled out in the contract). The commission on a 10-year fixed index annuity ranges from 6 percent to 8 percent, according to 

You may incur fees for riders — added provisions that tailor the annuity to your wishes. For example, you might want a rider to continue payouts to heirs for a set period after you die. Typically, the more riders you have, the lower your annuity payout. 

Finally, fixed annuities may have administrative charges as well as mortality expenses, which compensate the insurance company if you die earlier than expected. Be sure to examine the annuity contract carefully for fees and ask your agent about anything you don’t understand. 

How safe is my annuity?

Annuity benefits aren’t insured by the federal government, as bank accounts are. Instead, they are insured by state guaranty associations, which insure annuities up to $250,000. There are state guaranty associations for all 50 states as well as Puerto Rico and the District of Columbia. In most cases, your annuity payments would be covered by your state’s guaranty association. 

Nevertheless, it’s always wise to check an annuity provider’s financial soundness. Several companies, including A.M. Best, Standard & Poor’s Global Ratings, Moody’s Investor Services and PolicyGenius, rate the insurers’ financial security.