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Annuity Calculator

An annuity is a type of investment plan that gives back a series of payouts in return for an initial lump sum or smaller contributions for a specific duration. The annuity calculator helps to calculate the payouts you will receive, number of years you will receive the payouts for and principal amount required to generate the desired payouts.  

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Disclaimer:

The values shown here are only for illustration.
The results are generated based on the information provided. It is not intended to be and must not alone be taken as the basis for an investment decision.

Your Pension Calculation

Start Investing Age 0 Age 0
Investment Amount ₹ 1,000 ₹ 0
Investment Period 35 Yrs 35 Yrs
Total Investment ₹ 0 Lakhs ₹ 4.20 Lakhs
Returns ₹ 0.00 Lakhs ₹ 0.00 Lakhs
Lumpsum Amount ₹ 0.00 Lakhs ₹ 0.00 Lakhs
Pension Wealth ₹ 0.00 Lakhs ₹ 0.00 Lakhs

Your Monthly Pension
₹ 0.00 Lakhs

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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What Is an Annuity?

An annuity works like a long-term investment plan that provides a series of payouts to an individual over a specific term. It is a financial contract between an insurance provider (insurer) and an individual (insured) where the latter makes contributions in the form of a lump sum or instalments. In exchange, the insurer pays a fixed or variable income stream over a specific period or the rest of the insured person's life.

Annuities are financial products that pay a guaranteed income stream. These are usually bought by people about to become a retiree to supplement their income and mitigate the risk of their retirement savings running out. Annuity plans can be structured in a variety of ways based on the customer’s needs. Annuity plans can be categorised as immediate, deferred, fixed or variable based on their payout options alone.

The primary aim of an annuity plan is to supplement your income after you retire. It addresses the risk of you outliving your savings by providing a fixed and regular income stream for a fixed number of years or the rest of your life. If your current retirement plan does not provide enough income when adjusted for the current rate of inflation, an annuity plan is the perfect tool to ensure a steady cashflow.

What Is Annuity Calculator?

The annuity calculator is an online financial tool that allows you to calculate the payouts you will receive from a given annuity plan. With it, you can find out the principal required to generate your desired pension and the required investment horizon. It’s an invaluable tool you can use for retirement planning. 

The calculator requires you to enter your contribution amount (lump sum or systematic), investment period, rate of returns and percentage of corpus allocated for pension. After you enter these details, it will show you the maturity amount, returns earned and your monthly pension from the annuity plan. You will also know how long it will take to accumulate your desired corpus.  

Using this simple online tool, you can find out your required investment amount and compare different annuity plans to make an informed financial decision.

Types of Annuities

There are primary four types of annuity plans available in India. These are:

1. Immediate Annuity Plans:
 

These plans require you to make a single, one-time, lump sum payment for premiums. In as little as one month of receiving your initial payment, the insurance provider will start providing you with a stable income stream. In other words, immediate annuities start payments immediately after receiving the premium.

Immediate annuity plans are ideal for those who are close to their retirement age and need a supplementary source of income. If you already have a retirement corpus, you can invest in an immediate annuity to get a guaranteed income stream without having to wait. The payout structure can be either fixed or variable, depending on your needs.

2. Deferred Annuity Plans:
 

Deferred annuities require you to pay a premium, either as a lump sum or in instalments. The money stays invested during the accumulation phase of the tenure, after which the corpus is used to make regular payments over a specified period or the rest of your life. This ensures you receive regular income during your post-retirement years.

Deferred annuity plans allow you to grow your corpus, providing better income compared to immediate annuity plans. The earlier you start investing in a deferred annuity plan, the more your income will grow through interest accruals or capital gains before the annuity payments start. These plans are ideal for younger and mid-age professionals who have enough time to invest for their retirement.  

3. Fixed Annuity Plans
 

This is a traditional type of annuity plan that provides a specific and guaranteed interest rate on your contributions. These plans require a fixed sum of payments through premiums and generate returns used to pay a fixed income after your retirement. Fixed annuity plans invest in only low-risk government securities and corporate bonds to provide guaranteed returns that don't vary with the market.

Fixed annuities are ideal for the most risk-averse investors, like retirees. These plans ensure a stable and assured payout for a certain period or the rest of the investor's life. Moreover, these plans provide the flexibility of adding riders like death benefits and the addition of a spouse as a beneficiary.

4. Variable Annuity Plans
 

As the name suggests, variable annuities provide variable income after retirement based on the market performance of the assets they invest in. These plans invest in stocks, bonds, mutual funds, money market instruments, or a combination of these asset classes. They are suitable for investors who are experienced with different types of investments and are willing to take risks.

While variable annuities cannot provide fixed or assured returns, they offer the chance of higher payouts than traditional annuities. Over the long term, these plans can provide high returns from market-linked assets. 

5. Indexed Annuities:
 

These types of annuities are designed to serve as a middle ground between fixed and variable annuities. Indexed annuity plans link your contributions to the returns of one or more market indices. 

There are also several types of indexed annuities that include a guaranteed minimum payout, which is almost similar to fixed annuities. However, please note that indexed annuities also have a capping on how much your investments can earn, even though your chosen index performs exceptionally well.

6. Lifetime Annuities:
 

It refers to annuities which aim to pay out a fixed amount on a regular basis for the rest of your life. The amount you pay is agreed upon at the time of purchase, and you can choose the frequency of payouts. However, once you purchase a lifetime annuity, the terms are fixed, and you cannot adjust the amount of payment or cancel the annuity.

To better understand potential returns and plan effectively, you can use an annuity calculator to evaluate how indexed annuities might fit your financial goals.

Steps to Use an Annuity Calculator

The annuity calculator is a simple and straightforward tool that assists you with retirement planning. Follow the given step-by-step guide to use our annuity calculator:

Step 1: Enter your full name as given in your government ID proof, such as an Aadhaar card or PAN card.

Step 2: Enter your date of birth and contact details.

Step 3: Enter the following details in the annuity calculator, including the rate of returns (expected or fixed), monthly contributions you want to make and expected returns from the pension.

Step 4: Finally, click on the checkbox allowing HDFC Life representatives to send you the required details and then click on ‘Calculate Now’.

You can use our flexible online tool as many times as you want to compare annuity plans.

Understanding the Factors Affecting Your Pension

The following factors will affect the pension income you can get from annuities:

  • Current Interest Rates: 

    • Annuity rates are highly influenced by the prevailing interest rates, which depend on the state of the economy. When the interest rates in the market are high, it allows you to lock-in the high rates on your annuity plan. On the other hand, insurance companies will offer lower rates when the market interest rates are down.

  • Type of Plan:

    • There are many different types of annuity plans with different investment options and payouts. While fixed annuities provide guaranteed income, they are relatively low. On the other hand, variable annuities can provide higher income, but their returns are unpredictable. Meanwhile, deferred annuities offer higher return rates over immediate annuities as your money has more time to grow.

  • Deposit Amount:

    • If the one-time premium or instalment amount increases, so will your annuity income. However, there are exceptions, as immediate annuity plans offer lower returns due to the absence of an accumulation period. Some insurance companies provide higher purchase price incentives, which are bonuses applicable to certain annuity plans.

  • Investment Type:

    • While investments in low-risk securities like government bonds provide an assured payout, the rates are relatively low. On the other hand, annuities that invest in market-linked assets like mutual funds offer higher but more variable returns.

  • Age:

    • A younger age leads to lower annuity income as the insurance company has to cover a longer period of payments. As younger applicants are more likely to live for longer, they get lower pensions than older applicants.

  • Gender:

    • The annuity rates also vary across genders due to differences in life expectancies. Generally, women applicants get lower pension rates as they are expected to live longer.

  • Medical Conditions:

    • Annuity income is typically lower for healthier applicants as they are expected to live for longer. Applicants with health conditions may be eligible for a higher pension income.

  • Riders:

    • Certain annuity plans come with options to add riders that enhance the base plan’s coverage. For instance, you can add a death benefit rider that provides life insurance coverage or add your spouse to the plan with a joint or survivor rider. These options can increase the required premium amount or decrease your future pension.

  • Payout Period:

    • The shorter the payment term, the higher your pension income. That's why term-certain annuities offer higher pension amounts than life annuities, where the insurer has to continue making payments as long as you are alive.

How Does Annuity Calculator Work?

The annuity calculator takes certain inputs, including the starting age of investments, the total or monthly investment amount, payout period and frequency as well as the assured interest rate. With these inputs, the online tool uses a simple formula to estimate your investment returns. The results are always accurate and instantaneous.

 

Here is the formula used by the annuity plan calculator to calculate the future value of an annuity plan:

 

FV = P x [(1 + r) ^n – 1] / r

 

Where FV is the future value of a regular annuity

 

P is the rupee value of each annuity premium

 

r is the interest rate or expected rate of returns (for fixed/variable plans) divided by the compounding period

 

n is the number of times the interest rate is compounded

 

Let’s understand how this calculation works with an example. Suppose that you decide to invest Rs. 10,000 per month into an annuity plan for the next 30 years (till you reach retirement age at 60 years). Let’s say that the annuity is expected to provide 6% yearly returns from its investments.

 

If the entire corpus is allocated to a pension, your total returns earned will be around Rs. 65 lakh on your Rs. 36 lakh investment. Your monthly pension will be Rs. 50,477.

 

Instead of going through the hassles of manual calculation, you can instead use an annuity return calculator to estimate the payouts needed for a comfortable retirement.

Annuity Calculator Results

As mentioned before, the annuity calculator displays the future value of your investments and the pension amount you can receive. You can use the calculator multiple times to know the required contributions to get your desired retirement income. By comparing the pension receivable against other retirement plans, you can make a more informed choice.

Our pension annuity calculator shows the following results:

  • Total retirement savings upon maturity
  • Total contributions and interest earned
  • Lump sum and pension corpus (at retirement age)
  • The monthly and yearly pension amount

You will also be able to check a list of annuity plans offered by HDFC Life, which can help you achieve your retirement goals. 

Accumulation Schedule

An accumulation schedule provides the details of payments you need to make during the accumulation period, as well as the payouts you will receive. The accumulation period is the predetermined timeframe when your annuity investments grow from interest accrual, capital gains and dividends.

 

Upon entering the starting principal amount, fixed or expected interest rate and the number of years till payout in an annuity calculator, you will also get the applicable accumulation schedule. This is a table that shows the values of each withdrawal from your annuity corpus.

 

Here's the accumulation schedule for an annuity plan where you have contributed Rs. 10 lakh for an interest rate of 6% per annum and a payout period of 10 years. The monthly pension amount is Rs. 11,047.

 

Year

Age

Withdrawal Amount

Interest

Remaining Balance

1

60 years

Rs. 1,32,562

Rs. 57,971

Rs. 9,25,409

2

61 years

Rs. 2,65,124

Rs. 1,11,341

Rs. 8,46,218

3

62 years

Rs. 3,97,685

Rs. 1,59,827

Rs. 7,62,142

4

63 years

Rs. 5,30,247

Rs. 2,03,128

Rs. 6,72,880

5

64 years

Rs. 6,62,809

Rs. 2,40,922

Rs. 5,78,113

6

65 years

Rs. 7,95,371

Rs. 2,72,872

Rs. 4,77,502

7

66 years

Rs. 9,27,933

Rs. 2,98,617

Rs. 3,70,684

8

67 years

Rs. 10,60,494

Rs. 3,17,773

Rs. 2,57,278

9

68 years

Rs. 11,93,056

Rs. 3,29,934

Rs. 1,36,878

10

69 years

Rs. 13,34,670

Rs. 3,34,670

0

Benefits of Annuity Calculator

Here are some of the top benefits of using an annuity deposit scheme calculator to assess the viability of your investments:

Financial Planning

Financial Planning

HDFC Life's annuity calculator enables investors to create a comprehensive retirement pension plan and thorough financial planning. It helps determine how much one needs to save and invest to achieve retirement goals.

Customisation

Customisation

Using an annuity calculator helps investors tailor their inputs to get a desired financial outcome as per their situation and preferences. This means that investors can adjust the variables such as the initial investment, payout frequency, and duration to create a plan that suits their needs.

Comparison

Comparison

Using the annuity deposit scheme calculator, you can easily compare different annuity options offered by HDFC Life. Get estimates for fixed annuities and variable annuities. Understand deferred and immediate annuity and their payout options. This allows you to make informed decisions based on your specific requirements and objectives.

Clarity

Clarity

An annuity calculator is also called a Retirement Calculator simply because it lends a clear understanding of the potential payouts, and accordingly, you can plan for your retirement income needs. HDFC Life's annuity deposit calculator provides transparent and easy-to-understand results. You can use it to make confident financial decisions for your future.

Risk Management

Risk Management

Evaluate and manage risks associated with annuities, such as inflation risk and market volatility. HDFC Life's calculator helps you assess potential risks and adjust your strategy accordingly to ensure a secure and stable retirement income stream.

Potential Risks of Annuities

There are certain types of risks associated with annuities, which are as follows:

1. Level of Difficulty:
 

Annuity schemes are complicated contracts that consist of numerous pages of terms and conditions. Therefore, you must go through the T&C documents to fully understand your benefits, rights, additional features, and potential rate of return.

2. Sales Commission Payments:
 

Sales commission on annuities can be significant and can go as high as 10 percent of the total value. Sometimes, the contract might not disclose how these changes are applied, and complex annuity products may charge even higher commissions.

3. Lack of Liquidity:
 

The amount invested in an annuity is typically locked in for a longer duration, therefore making it more difficult to access a sizable amount during an emergency.

4. Additional Expenses:
 

Annuities might include various other additional expenses. For instance, if you own a variable annuity, the mutual fund might charge higher management fees, which might cost you even more than a publicly traded mutual fund.

Summary

An annuity calculator is a great tool to help compute your income from investments during a specific period. Whether you are investing in an annuity for its insurance benefits or you are opting for it for retirement financial planning, the calculator is a must to use. It aids investors in understanding their total retirement amount and assessing additional savings they might have to undertake. It also showcases the future value of savings and gives you the number of years you will have to invest to generate a comfortable return. Hence, this tool is a must-have when planning your finances for your golden years.

FAQs on Annuity Calculator

1 How much can a 100000 annuity pay per month?

The monthly payment from an INR 100,000 annuity would depend on several factors, including the type of annuity, interest rates, and payout options chosen. It is best to use an annuity calculator to check the same on the basis of these variables.

2 How to calculate an annuity?

An annuity can be calculated using various formulas depending on the type of annuity. For example, the formula for calculating the future value of a series of equal payments (ordinary annuity) is FV = Pmt * [(1 + r)^n - 1] / r, where FV is the future value, Pmt is the payment per period, r is the interest rate per period, and n is the number of periods.

3 Why do we calculate annuity?

Annuities are calculated to determine future cash flows. These help plan for retirement income, evaluate investment options or manage risk.

4 How to calculate annuity in Excel?

Excel's built-in financial functions, such as PMT, PV, FV, and RATE, can be used to calculate various aspects of an annuity. For example, the PMT function helps calculate the periodic payment of an annuity.

5 What is the annuity value?

Annuity value refers to the present or future worth of several equal payments over a specified period.

6 Can an annuity calculator predict future returns accurately?

An annuity calculator mainly provides accurate returns. However, these estimates are made based on the inputs provided—initial investment amount, annuity rates, and payout options. The accuracy of these results depends upon how accurate the inputs were and if market fluctuations and other variables affected the results. 

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1. As per Income Tax Act, 1961. Tax benefits are subject to changes in tax laws.

2. Amount of guaranteed income will depend upon premiums paid subject to applicable terms and conditions.

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