function calculateAnnuity() {
var principal = parseFloat(document.getElementById('initialPrincipal').value);
var annualContribution = parseFloat(document.getElementById('annualContribution').value);
var deferralYears = parseFloat(document.getElementById('deferralYears').value);
var growthRate = parseFloat(document.getElementById('growthRate').value) / 100;
var payoutYears = parseFloat(document.getElementById('payoutYears').value);
var payoutRate = parseFloat(document.getElementById('payoutRate').value) / 100;
if (isNaN(principal) || isNaN(deferralYears) || isNaN(growthRate) || isNaN(payoutYears)) {
alert("Please fill in all required fields with valid numbers.");
return;
}
// Phase 1: Accumulation (Future Value of Lump Sum + Future Value of Annuity Du/Ordinary)
// We assume end-of-year contributions for simplicity
var fvPrincipal = principal * Math.pow((1 + growthRate), deferralYears);
var fvContributions = 0;
if (growthRate > 0) {
fvContributions = annualContribution * ((Math.pow((1 + growthRate), deferralYears) – 1) / growthRate);
} else {
fvContributions = annualContribution * deferralYears;
}
var totalAccumulated = fvPrincipal + fvContributions;
// Phase 2: Distribution (Calculating the payment from the accumulated lump sum)
// Payout Formula: PMT = PV * [ r / (1 – (1 + r)^-n) ]
var annualPayout = 0;
if (payoutRate > 0) {
annualPayout = totalAccumulated * (payoutRate / (1 – Math.pow((1 + payoutRate), -payoutYears)));
} else {
annualPayout = totalAccumulated / payoutYears;
}
var monthlyPayout = annualPayout / 12;
var totalLifetimePayout = annualPayout * payoutYears;
// Display Results
document.getElementById('annuityResult').style.display = 'block';
document.getElementById('resAccumulated').innerText = formatCurrency(totalAccumulated);
document.getElementById('resAnnualPayout').innerText = formatCurrency(annualPayout);
document.getElementById('resMonthlyPayout').innerText = formatCurrency(monthlyPayout);
document.getElementById('resTotalPayout').innerText = formatCurrency(totalLifetimePayout);
}
function formatCurrency(value) {
return '$' + value.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
}
Understanding the Deferred Annuity Calculator
A deferred annuity is a financial contract designed for long-term savings. Unlike an immediate annuity, which starts paying out right away, a deferred annuity has two distinct phases: the accumulation phase and the payout phase. This calculator helps you project how much your savings will grow before you begin receiving income.
Key Components Explained
Initial Principal: The amount of money you invest at the start of the contract.
Years to Defer: The length of time you plan to let the money grow before you start taking withdrawals. The longer the deferral period, the more time compound growth has to increase your balance.
Accumulation Growth Rate: The estimated annual percentage rate your investment will earn during the deferral period.
Payout Phase Growth Rate: Many annuities continue to earn a return even after you begin taking payments. This rate reflects the growth on the remaining balance during the distribution years.
The Math Behind the Calculation
The calculator uses two primary financial formulas:
Future Value of a Lump Sum & Annuity: To find the total at the end of the deferral period, we use:
FV = P(1 + r)^n + [C * ((1 + r)^n - 1) / r] Where P is principal, C is annual contribution, r is rate, and n is years.
The Payout Formula (Amortization): To determine the annual income, we use:
PMT = PV * [ r / (1 - (1 + r)^-n) ]
Example Scenario
Imagine you invest 50,000 today and contribute 2,000 annually for 15 years. If your account grows at 6% during this deferral period, your total balance would grow to approximately 166,134. If you then choose to receive payments over 20 years with a 4% payout growth rate, you would receive roughly 12,224 per year (or about 1,018 per month).
Note: This calculator is for educational purposes only. Real-world annuity products may include fees, commissions, and specific tax implications that can affect the final payout. Always consult with a certified financial advisor before making investment decisions.