# Immediate Annuity Calculator SPIA – With Usage Instructions

January 2nd, 2013 by David WaringAn immediate annuity can provide you with income for the rest of your life. It’s a solution that can meet a need for regular income, for example when you retire. However, if you want to be sure you won’t run out of money, you have to check if that income will be enough for your needs. This calculator estimates what your income will be if you invest in an immediate annuity. You can then compare that figure with what you think your income needs will really be.

### How do you use the Immediate Annuity Calculator?

You’ll need to put in the following information:

**Lump Sum To Invest: **Enter here the amount that you invest for the immediate annuity to begin operation. The assumption is that you will be making a one-time payment and that income will start being generated for you immediately. Don’t put any commas in the number – for example, enter 100000 for one hundred thousand dollars for the calculator to work properly.

**Life Expectancy (In Years):** This is how much longer the insurance company thinks a person of your age and gender will live. It’s their estimate, not yours. You can get the corresponding figure by first looking up the total life expectancy of a person with your profile on this web page.

Use the figures in Appendix B for example to look up the year of your birth and then take the figure given where the horizontal row from your year of birth intersects with the appropriate column for you (male, female, etc.). Now subtract your current age from that total life expectancy figure; that will give you the number of years to then be entered into the calculator.

For example, if you were a woman born in 1960, the nationwide average for your total life expectancy would be 73.1 years. If you are currently 51 years old, your remaining life expectancy (what you enter in the calculator) would therefore be 22.1 years. Immediate annuities can be defined for fixed periods or for a lifetime. If you decide to purchase one for lifetime income, be sure this is explicitly specified in the annuity.

**Annual Rate Of Return (%):** This is an important factor in the calculation, but it will vary according to market conditions and also from one company to another. To begin with, you can put in a conservative estimate for this rate of return of, say, 3%.

**Payment Frequency:** Defines how often you would like to receive a check. “Monthly” is a frequent choice.

**Annuity payment:** When you’ve entered in the data above and clicked on “Calculate”, this is the result. It’s an estimate of what you would receive (monthly, for example, if you selected a payment frequency of “monthly” above).

### What are the limitations of the Immediate Annuity Calculator?

The calculator only applies to immediate annuities with fixed income payments. Annuities with variable payments exist, but this calculator does not work for them. Any approximations in the information you put in (annual rate of return for example) will mean that the result can also only be approximate. If an annuity appears to come close to meeting your income requirements, then it may be worth exploring more in depth.