1. What is a Deferred Annuity?

A deferred annuity is a financial product that allows you to accumulate funds during a deferral period and then receive regular payments during a payout period. It's commonly used for retirement planning.

2. How Does the Calculator Work?

The calculator uses two formulas:

Where:

• \( PV \) — Initial premium (USD)
• \( r \) — Interest rate per period (decimal)
• \( n \) — Number of deferral periods
• \( m \) — Number of payout periods
• \( FV \) — Future value at end of deferral
• \( PMT \) — Regular payment amount

Explanation: The first formula calculates the accumulated value, the second calculates the payment amount that can be sustained over the payout period.

3. Importance of Deferred Annuity Calculation

Details: Accurate calculation helps in retirement planning by showing how much income an initial investment can generate after a growth period.

4. Using the Calculator

Tips: Enter the initial premium in USD, interest rate as a decimal (e.g., 0.05 for 5%), number of deferral and payout periods. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between immediate and deferred annuities?
A: Immediate annuities start payments right away, while deferred annuities have an accumulation phase before payments begin.

Q2: How does compounding frequency affect results?
A: The calculator assumes compounding matches the period length. For annual compounding use annual rates and periods.

Q3: Are there tax implications for deferred annuities?
A: Yes, growth is tax-deferred but withdrawals are taxed as ordinary income. Consult a tax professional.

Q4: What happens if I withdraw early?
A: Most deferred annuities have surrender charges for early withdrawals, plus possible tax penalties.

Q5: Can the payment amount change?
A: This calculator assumes fixed payments. Variable annuities have payments that can fluctuate.