function calculateAnnuity() {
var principal = parseFloat(document.getElementById('initialPremium').value);
var rate = parseFloat(document.getElementById('guaranteedRate').value);
var years = parseFloat(document.getElementById('accumulationYears').value);
var resultDiv = document.getElementById('annuity-result');
if (isNaN(principal) || isNaN(rate) || isNaN(years) || principal <= 0 || years <= 0) {
alert("Please enter valid positive numbers for all fields.");
return;
}
var decimalRate = rate / 100;
var futureValue = principal * Math.pow((1 + decimalRate), years);
var interestEarned = futureValue – principal;
document.getElementById('resTotalValue').innerText = "$" + futureValue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resTotalInterest').innerText = "$" + interestEarned.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
resultDiv.style.display = 'block';
}
Understanding Fixed Annuities: Growth and Security
A fixed annuity is a contract with an insurance company that guarantees a specific, fixed rate of return on your invested capital. Unlike variable annuities, which fluctuate with market performance, fixed annuities offer a predictable growth trajectory, making them a popular choice for retirees or those nearing retirement who prioritize capital preservation.
How the Fixed Annuity Calculator Works
This calculator uses the compound interest formula to determine how much your initial premium will grow over a set period. Fixed annuities typically compound interest annually. The formula used is:
A = P(1 + r)^t
A: The future value of the account.
P: The initial premium (your starting investment).
r: The guaranteed annual return rate (expressed as a decimal).
t: The number of years the money is left to accumulate.
Key Benefits of Fixed Annuities
Investors often choose fixed annuities for three primary reasons:
Tax-Deferred Growth: You do not pay taxes on the interest earned until you begin making withdrawals, allowing your balance to compound faster.
Guaranteed Principal: Your initial investment is protected from market volatility.
Predictable Income: You can eventually convert the accumulated balance into a guaranteed stream of income for life.
Example Calculation
Suppose you invest an Initial Premium of 100,000 into a fixed annuity with a Guaranteed Annual Return of 5% for a term of 15 years.
After Year 1: Your balance becomes 105,000.
After Year 15: Your total account value would grow to approximately 207,892.82.
The total interest earned during this period would be 107,892.82.
Important Considerations
While fixed annuities offer stability, they often come with "surrender periods." If you withdraw your funds before the accumulation period ends, you may face significant surrender charges. Always review the terms of your specific contract regarding liquidity and death benefits before committing large sums of capital.