Annuity Math Depends on When Payments Occur
An annuity calculation values a repeated cash-flow stream over a defined number of periods. Payments at the beginning of each period and payments at the end of each period are not equivalent because beginning-of-period payments participate in one additional period of interest.
Insurance annuity products can include guarantees, mortality features, surrender charges, riders and insurer credit risk that are not represented by a generic time-value-of-money calculation. Use contract illustrations for product-specific decisions.
An annuity payout estimate depends heavily on what is being modeled. A fixed mathematical payout from a starting balance and assumed rate is not the same as an insurance-company quote, which may include guarantees, mortality assumptions, fees, riders and surrender terms. Use the calculator to understand the relationship between principal, return, payout frequency and duration. For an actual annuity purchase, compare those modeled cash flows with the contract's guaranteed and non-guaranteed values.
Frequently Asked Questions
What is the difference between an ordinary annuity and an annuity due?
An ordinary annuity pays at the end of each period; an annuity due pays at the beginning, changing the number of interest periods for each payment.
Does this evaluate an insurance annuity contract?
No. It models cash-flow mathematics and does not reproduce insurer-specific fees, guarantees, riders or surrender terms.
Why can an insurance annuity quote differ from this payout calculation?
Real contracts may include mortality pooling, guarantees, insurer pricing, expenses and optional riders. A mathematical payout model does not reproduce every contractual feature.
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