Deferred Fixed Annuity Calculator
See year-by-year growth, yield to term, and after-tax value for your fixed annuity investment.
| Year # | Beginning Value ($) | Annual Rate (%) | Year-End Value ($) | Yield to Term (%) |
|---|
Compounding Frequency Reference
The table below shows how many times per year interest is applied for each compounding option, along with the effective annual yield on a 5% nominal rate.
| Compounding Period | Times Per Year (n) | Effective Rate at 5% Nominal |
|---|---|---|
| Daily (365) | 365 | 5.1267% |
| Daily (360) | 360 | 5.1267% |
| Weekly | 52 | 5.1246% |
| Biweekly | 26 | 5.1218% |
| Semimonthly | 24 | 5.1210% |
| Monthly | 12 | 5.1162% |
| Bimonthly | 6 | 5.1052% |
| Quarterly | 4 | 5.0945% |
| Semiannually | 2 | 5.0625% |
| Annually | 1 | 5.0000% |
What Is a Deferred Fixed Annuity?
A deferred fixed annuity is a contract between you and an insurance company where you deposit a lump sum that grows at a guaranteed interest rate over a set term, typically one to ten years. The word “deferred” means your money accumulates during this period before any withdrawals begin. “Fixed” means the insurer guarantees a stated rate, unlike variable annuities whose returns depend on market performance.
During the accumulation phase, all interest compounds without being subject to current income tax. You only owe taxes when you take distributions, which is what makes deferred annuities a powerful tool for long-term, tax-advantaged growth.
How This Calculator Works
The calculator applies the compound interest formula to each year of your annuity term separately. This lets you model real-world situations where the declared rate changes year to year, which is common with multi-year guarantee annuities (MYGAs) or tiered-rate products.
where r = annual rate (decimal), n = compounding periods per year
At the end of each year the resulting value becomes the beginning value for the next year. Yield to term at any year is calculated as:
Understanding the Results Table
Each row in the results table shows the starting balance for that year, the annual rate applied, the ending balance after compounding, and the cumulative yield to term since day one. This lets you see both single-year growth and total return at a glance.
Taxes on Fixed Annuity Withdrawals
Taxes on a deferred fixed annuity apply only to the interest earned, not to your original principal. If you invest with pre-tax dollars (such as through a qualified plan), the entire withdrawal, including principal, may be taxable. For non-qualified annuities, only the gain above your cost basis is taxed.
To estimate your after-tax value, enter your expected ordinary income tax bracket. The calculator multiplies total interest earned by that percentage and subtracts it from the final value.
Pre-Tax vs. After-Tax Investments
When you check “Investment is Pre-tax,” the calculator treats your entire initial investment as money that has not yet been taxed, meaning the full withdrawal amount could be subject to ordinary income tax at your rate. For most individual non-qualified annuities, only the earnings portion is taxed, so leave that box unchecked unless your annuity is held inside a traditional IRA or 401(k).
Fixed Annuity Term Lengths Explained
Fixed annuity terms range from one to ten years. Shorter terms offer more flexibility, while longer terms often lock in higher guaranteed rates. Many investors ladder annuity terms, staggering maturity dates so a portion of savings becomes available each year, balancing liquidity with yield.
Deferred Fixed Annuity vs. Other Savings Products
Compared to certificates of deposit (CDs), fixed annuities often offer similar or higher rates with the added benefit of tax deferral. Unlike CDs, gains are not taxed annually. However, annuities may carry surrender charges for early withdrawal and are not FDIC insured. Compared to bonds, annuities provide guaranteed rates without market price fluctuation but with less liquidity.