Fixed Annuity Growth Calculator
Estimate the future value of your guaranteed investment based on current fixed rates and growth terms.
Understanding Fixed Annuities
A fixed annuity is a contract between an individual and an insurance company. In exchange for a lump-sum payment (the initial premium), the insurer guarantees a specific interest rate for a predetermined period. Unlike variable annuities, fixed annuities offer protection against market volatility, making them a popular choice for retirement planning.
How the Math Works
The growth of a fixed annuity is calculated using the compound interest formula. Because the interest earned in one period begins earning interest in the next, the value grows exponentially over time. The standard formula used by this calculator is:
- A: Final account balance
- P: Initial premium amount
- r: Annual interest rate (decimal)
- n: Number of times interest compounds per year
- t: Accumulation period in years
Example Calculation
If you invest an Initial Premium of 100,000 into a fixed annuity with a 5% annual rate for a 10-year term with annual compounding:
- Year 1: 100,000 + 5,000 = 105,000
- Year 2: 105,000 + 5,250 = 110,250
- …
- Year 10 Total: 162,889.46
- Total Guaranteed Interest: 62,889.46
Why Choose a Fixed Annuity?
Fixed annuities are often utilized for their "triple tax-advantaged" status: tax-deferred growth, tax-free transfers (within 1035 exchanges), and the ability to convert the balance into a lifetime income stream. They serve as a middle ground between high-risk stocks and low-yield savings accounts.