Project the potential growth of your variable annuity investment based on assumed market performance and fees.
Includes M&E, Admin, and Fund fees.
Projected Results
Total Principal Invested:$0.00
Gross Account Value:$0.00
Estimated Fees Paid:$0.00
Net Investment Gain:$0.00
Effective Annual Yield (Net):0.00%
Tax Deferral Impact:
If withdrawn as a lump sum today (assuming earnings taxed as ordinary income), estimated after-tax value: $0.00
function calculateAnnuity() {
// 1. Get Inputs
var initialPremium = parseFloat(document.getElementById('vacInitialPremium').value);
var monthlyContrib = parseFloat(document.getElementById('vacMonthlyContrib').value);
var grossReturnRate = parseFloat(document.getElementById('vacReturnRate').value);
var annualFees = parseFloat(document.getElementById('vacAnnualFees').value);
var years = parseFloat(document.getElementById('vacYears').value);
var taxRate = parseFloat(document.getElementById('vacTaxRate').value);
// 2. Validation
if (isNaN(initialPremium)) initialPremium = 0;
if (isNaN(monthlyContrib)) monthlyContrib = 0;
if (isNaN(grossReturnRate)) grossReturnRate = 0;
if (isNaN(annualFees)) annualFees = 0;
if (isNaN(years) || years <= 0) {
alert("Please enter a valid number of years.");
return;
}
if (isNaN(taxRate)) taxRate = 0;
// 3. Calculation Logic
// Variable annuities calculate fees typically on the account value daily or monthly.
// For projection, we calculate the Net Rate = Gross Rate – Fees.
// However, to display total fees paid accurately, we need to iterate month by month.
var totalMonths = years * 12;
var monthlyGrossRate = grossReturnRate / 100 / 12;
var monthlyFeeRate = annualFees / 100 / 12;
// Net monthly rate for compound growth (approximate)
// Real calculation: Value grows by Gross, then Fee is deducted.
var currentBalance = initialPremium;
var totalFeesPaid = 0;
var totalPrincipal = initialPremium;
for (var i = 1; i 0 ? netGain * (taxRate / 100) : 0;
var afterTaxValue = grossValue – taxesOnGain;
// 4. Update UI
document.getElementById('resPrincipal').innerText = formatCurrency(totalPrincipal);
document.getElementById('resGrossValue').innerText = formatCurrency(grossValue);
document.getElementById('resFees').innerText = formatCurrency(totalFeesPaid);
document.getElementById('resGain').innerText = formatCurrency(netGain);
document.getElementById('resNetYield').innerText = effectiveYield.toFixed(2) + "%";
document.getElementById('resAfterTax').innerText = formatCurrency(afterTaxValue);
document.getElementById('vacResults').style.display = 'block';
}
function formatCurrency(num) {
return '$' + num.toLocaleString('en-US', { minimumFractionDigits: 2, maximumFractionDigits: 2 });
}
Understanding Variable Rate Annuities
A variable rate annuity is a tax-deferred retirement vehicle that allows you to invest in a variety of sub-accounts, similar to mutual funds. Unlike fixed annuities that offer a guaranteed interest rate, variable annuities offer returns based on the performance of the underlying investments you choose. This introduces the potential for higher growth, but also comes with investment risk.
How This Calculator Works
This calculator helps you project the future value of a variable annuity by accounting for the complex interplay between market returns and the various fees associated with these contracts. The logic uses an iterative monthly calculation to accurately deduct fees from the growing account balance:
Principal & Contributions: Tracks your initial premium and any subsequent monthly additions.
Gross Return: Applies your assumed annual market return to the account balance.
Fee Impact: Deducts annual fees (converted to a monthly rate) from the account value, showing you the "drag" fees can have on long-term growth.
Tax Deferral: Estimates the value after taxes if you were to surrender the policy, highlighting that gains are taxed as ordinary income, not capital gains.
Key Input Definitions
To get the most accurate results, it is important to understand the input fields:
Assumed Annual Gross Return: Since this is a "variable" annuity, the rate is not fixed. Enter an average expected return based on your chosen sub-accounts (e.g., equity funds might average 7-9%, while bond funds might average 3-5%).
Total Annual Fees: Variable annuities often carry multiple fees. You should sum these up for the input field:
Mortality and Expense (M&E) Risk Charge: Typically 1.25% per year.
Administrative Fees: Often around 0.15%.
Fund Expense Ratios: The fees of the underlying sub-accounts (ranging from 0.5% to 2.0%).
Rider Charges: Costs for optional benefits like guaranteed income riders.
Variable vs. Fixed Annuities
The primary difference lies in risk and return. In a Fixed Annuity, the insurance company bears the investment risk and guarantees a specific rate of return. In a Variable Annuity, you bear the investment risk. If the sub-accounts perform well, your account value grows significantly. If they perform poorly, your account value can decrease.
The Impact of Tax Deferral
One of the main benefits of a variable annuity is tax deferral. You do not pay taxes on interest, dividends, or capital gains while the money remains in the annuity. This allows your investment to compound faster compared to a taxable account. However, when you withdraw the money, earnings are taxed at your ordinary income tax rate, which may be higher than long-term capital gains rates.
Disclaimer: This calculator is for educational and illustrative purposes only. Variable annuities are complex financial products sold by prospectus. Actual returns will vary based on market performance. The assumed rates of return used in this calculator are hypothetical and do not guarantee future results. Fees and surrender charges can significantly reduce policy values. Please consult a qualified financial advisor before making investment decisions.