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Engineer your own personal pension. Calculate exactly how much guaranteed income your nest egg can generate for the rest of your life. This free online tool allows you to calculate annuity payouts quickly and accurately. No sign-up or installation required.
The single greatest fear for any retiree is Longevity Risk—the terrifying possibility that they will simply live too long and run completely out of money. If you rely entirely on withdrawing cash from the stock market to survive, a massive stock market crash early in your retirement can permanently destroy your portfolio.
An Annuity is a financial product designed to completely eliminate this risk. It is a contract you make with an insurance company: You give them a massive lump sum of cash today (e.g., $500,000), and in return, they mathematically guarantee to pay you a specific monthly income (e.g., $3,000 a month) for the absolute rest of your life, even if you live to be 110 years old and the original $500,000 runs out.
While annuities offer incredible psychological peace of mind, they are highly complex financial instruments with significant trade-offs:
When you hand over your $500,000 to the insurance company, that money is gone. You no longer have access to the lump sum. If you suddenly need $100,000 for a massive medical emergency, you cannot get it. You only have access to your monthly trickle of income.
A standard Fixed Annuity pays exactly the same amount every month. If you lock in a $3,000 payout at age 65, you will still receive $3,000 at age 85. However, due to inflation, that $3,000 will buy significantly less food and housing two decades later.
If you are 65 and retiring tomorrow, you want an Immediate Annuity (SPIA). You hand over the cash, and the monthly checks start arriving next month.
If you are 55 and planning ahead, you can buy a Deferred Annuity. You hand over the money now, but instruct the insurance company to delay the payouts for 10 years until you are 65. Because the insurance company gets to hold and invest your money for a decade before paying you anything, your final monthly payouts will be significantly higher than an immediate annuity.
Expert clarification on survivor benefits, insurance solvency, and alternative options.