- Variable annuity
- A variable annuity is an insurance product designed to provide long-term, tax-deferred savings. You do not receive a tax deduction on the money you deposit, however, you pay no taxes until you begin making withdrawals. There are no annual contribution limits or income limits. A Variable Annuity could be a good option if you wish to increase your tax-deferred savings. This calculator assumes that you make your contribution at the beginning of each year.
Variable annuity contracts will have different rules, restrictions and expenses that will vary by insurance company and by product within an insurance company. To fully understand a variable annuity, make sure you fully understand all options, restrictions and expenses for your specific variable annuity before you enter into such a contract. This calculator is not designed to describe a specific insurance product and should be used as a general illustration of the tax-deferred feature of a variable annuity.
- Starting balance
- Initial amount to contribute to your annuity. The starting balance is assumed to be contributed immediately and beginning earning a return.
- Current age
- Your current age.
- Withdrawal age
- Age you wish to start taking money out of the annuity. This calculator assumes that the year you begin withdrawals, you do not make any contributions to your annuity. For example, if you begin at age 65, your last contribution would have happened when you were actually age 64.
- Annual contribution
- The amount you will contribute to your variable annuity each year.
- Expected rate of return
- The annual rate of return you expect for your variable annuity. This calculator assumes that your return is compounded annually and your contributions are made at the beginning of each year. The actual rate of return is largely dependent on the types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending December 31st 2023, had an annual compounded rate of return of 15.2%, including reinvestment of dividends. From January 1, 1970 to December 31st 2023, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 10.9% (source: www.spglobal.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a financial institution may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.
It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that investment funds and/or investment companies may charge.
Insurance products may additionally include mortality, expense risk charges, cost of insurance, administrative, and surrender charges that will have a significant impact on the total rate of return for the investment.
- Current tax rate
- Your current marginal tax rate you expect to pay on your taxable investments.
- Retirement tax rate
- The marginal tax rate you expect to pay on your investments at retirement.
- Years until retirement
- Number of years before retirement.
- Annuity total before taxes
- Total value of your variable annuity at retirement before taxes.
- Annuity total after taxes
- Total value of your variable annuity at retirement after taxes are paid.
- Total taxable account
- Total value of your savings, at retirement, if your annual contribution is deposited into a taxable account.
