1. What is a Deferred Variable Annuity?

A deferred variable annuity is a contract with an insurance company that allows for tax-deferred growth of investments with payments that begin at a future date. The future value depends on the performance of the underlying investments.

2. How Does the Calculator Work?

The calculator uses the future value formula for a deferred variable annuity:

Where:

• \( Payments \) — Regular payment amount
• \( r \) — Periodic interest rate (in decimal form)
• \( t \) — Number of periods (typically years)

Explanation: The formula calculates how a single payment would grow over time with compound interest.

3. Importance of Future Value Calculation

Details: Calculating the future value helps in retirement planning by estimating how much an annuity payment could grow over time before withdrawals begin.

4. Using the Calculator

Tips: Enter the payment amount in dollars, interest rate as a decimal (e.g., 0.05 for 5%), and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between deferred and immediate annuities?
A: Deferred annuities grow tax-deferred until a future date, while immediate annuities begin payments right after purchase.

Q2: How does compounding frequency affect the calculation?
A: This calculator assumes annual compounding. More frequent compounding would yield slightly higher results.

Q3: Are variable annuity returns guaranteed?
A: Unlike fixed annuities, variable annuity returns depend on investment performance and are not guaranteed.

Q4: What fees should I consider with variable annuities?
A: Mortality and expense fees, administrative fees, and underlying fund expenses can reduce actual returns.

Q5: Are there tax implications?
A: Earnings grow tax-deferred but are taxed as ordinary income when withdrawn. Early withdrawals may incur penalties.