How a fixed annuity grows
A fixed annuity is a contract with an insurance company that credits a set interest rate, often guaranteed for several years. This calculator shows how a starting deposit plus regular monthly additions grow at a fixed rate, with interest compounding monthly. The year-by-year table shows how much of your balance comes from your own money and how much from interest.
Choose whether additions are made at the beginning or end of each month. Money added at the beginning earns one extra month of interest each time.
What to know before buying an annuity
- Tax deferral – earnings are not taxed until you withdraw them, and then they are taxed as ordinary income.
- Early withdrawal penalty – taking earnings out before age 59½ usually adds a 10% IRS penalty.
- Surrender charges – most annuities charge a fee if you withdraw more than a set amount during the first several years.
- Guarantees – they depend on the insurer's financial strength, so check its rating. State guaranty associations protect owners up to limits that vary by state.
Frequently asked questions
What is a multi-year guaranteed annuity (MYGA)?
A MYGA is a fixed annuity that locks in one interest rate for a set term, such as 3, 5 or 7 years, similar to a CD offered by an insurance company.
Is an annuity better than a CD?
An annuity may pay a higher rate and grows tax-deferred, but it is less liquid and is not FDIC insured. A CD is simpler and better for money you may need soon.
Can I put an annuity in an IRA?
Yes, but an IRA is already tax-deferred, so the annuity's tax benefit adds nothing. Buy one inside an IRA only for its other features.