Annuity Payout Calculator for Canadians
Composition of Annuity
How to Use WOWA’s Annuity Calculator
Annuity Present Value calculator calculates the present value of all payments from your annuity. Suppose you plan to use a lump sum to purchase an annuity; this calculator would show the portion of your payout being your initial purchase price and the portion which you are receiving over your purchase price.
Annuity Contribution Value calculates the present value of all payments you make to an annuity provider in installment payments. Finally, the Periodic Annuity Payments calculator calculates the periodic (e.g., monthly or annually) payment from an annuity. Each calculator is explained in more detail in its own section below.
Annuity Present Value
To calculate the present value of your annuity, choose the “Annuity Present Value” tab. Then choose between a fixed-term annuity and a life annuity. Also, choose between an immediate annuity or a deferred payment annuity. For fixed-term annuities, enter the annuitization period in years. Choose whether annuity payments are made monthly, quarterly, semiannually or annually.
Continue by entering the amount of payment made in each period and the interest rate. As the rate of interest, enter what you expect to be able to earn without taking risks on your money. For example, check out the Guaranteed Investment Certificate (GIC) returns.
Considering a life annuity, you should also enter your sex, age and life expectancy. We set a default life expectancy based on the life expectancy of an average Canadian in your gender and age group. For deferred annuities, also enter the time until the payments would start. This calculator will provide you with a personalized present value for your annuity.
Annuity Contribution Value
To calculate the present value of a series of payments you will make toward the installments of an annuity and its future value at the end of your contributions, select the “Annuity Contribution Value” tab. You would need to enter the accumulation time in years, the contribution frequency, the amount of each contribution, and the interest rate. The calculator would provide you with the future value of all your contributions and also their present value.
Periodic Annuity Payments
To calculate the payout you can expect from an annuity, start by choosing whether you are looking at a fixed-term annuity or a life annuity and continue by choosing between an immediate and a deferred annuity. For fixed-term annuities, we need to know the annuity term; for deferred annuities, we need to see the deferral period. Continue by entering the initial amount you want to invest and the interest rate. You should enter your gender and age to enable an estimation of your life expectancy for a life annuity. The calculator provides the expected periodic (e.g., Monthly or yearly) payment you can receive from your annuity.
Life Annuity Examples
| Gender | Age | Contribution | Annual Payout | Monthly Income | Provider |
|---|---|---|---|---|---|
| Male | 65 | $100,000 | $7,008 | $584 | RBC |
| Female | 65 | $100,000 | $6,627 | $552 | |
| Male | 75 | $100,000 | $8,447 | $704 | |
| Female | 75 | $100,000 | $7,861 | $655 | |
| Male | 65 | $500,000 | $34,864 | $2,905 | |
| Female | 65 | $500,000 | $32,779 | $2,732 | |
| Male | 65 | $100,000 | $6,348 | $529 | Sun Life |
| Female | 65 | $100,000 | $6,000 | $500 | |
| Male | 75 | $100,000 | $8,269 | $689 | |
| Female | 75 | $100,000 | $7,606 | $634 | |
| Male | 65 | $500,000 | $33,010 | $2,751 | |
| Female | 65 | $500,000 | $31,047 | $2,587 |
Annual annuity payments in this table are taken from RBC Annuity Calculator and Sun Life Annuity Calculator, both on April 16, 2023. Monthly income is taken as 1/12 of the annual payout from the annuity.
What is an Annuity?
An annuity is a financial product that provides a series of regular payments to an individual over a specified period of time, usually for retirement. An annuity is typically purchased by making a lump-sum payment or a series of payments to an insurance company, which then guarantees to make regular payments to the individual for a fixed term or the rest of their life.
An annuity can be structured in various ways, including fixed, variable, or indexed annuities. In a fixed annuity, the payments are guaranteed to remain the same throughout the life of the annuity. In a variable annuity, the payments can fluctuate based on the performance of the underlying investments. In an indexed annuity, the payments are linked to a specific market index, such as the S&P 500 or the S&P TSX index.
Annuities can provide a steady source of income during retirement or protect against the risk of outliving one's savings. However, they can also come with high fees and restrictions, so it's essential to carefully consider all options and consult a financial advisor before purchasing an annuity.
An annuity is a stream of payments. The recipient of an annuity is called an annuitant. An annuity can be a life annuity or a term annuity. Payments in a life annuity continue until the annuitant passes away. In a term annuity, payments are made for a specified period. An annuity is either an immediate payment annuity or a deferred income annuity. In an immediate annuity, periodic payments start right after the annuity contract is signed. In contrast, in a deferred annuity, payments start a few years after the contract is signed.
In a variable annuity, the payout would depend on the performance of the annuity fund. Most variable annuities are a hybrid of fixed and variable annuities. Their payout includes a fixed, predetermined payout and a variable payout.
Annuity Classifications
| Annuity | Life | Periodic payments will continue until the death of the annuitant or their spouse. |
| Fixed Term | Periodic payments for a specific number of periods to the annuitant. | |
| Annuity | Immediate | Regular payments will begin after the purchase of the annuity. |
| Deferred | To provide larger periodic payments, the annuity will grow for some periods before commencing payout. | |
| Annuity | Fixed Payment | The annuity provider will provide a specified payout irrespective of how their investments perform. |
| Variable Payment | The payout will depend on the performance of a specified investment portfolio. |
What is an Annuity Calculator?
An annuity calculator is a tool that helps you estimate how much income you may receive from an annuity based on various inputs, such as the initial investment amount, the expected rate of return, and the length of the annuity term. An annuity calculator can also help you compare different types of annuities to determine which one may be the most appropriate for your financial goals and circumstances.
Using an annuity calculator can be helpful in several ways. First, it can give you an idea of how much income you may receive from an annuity, which can help you plan for retirement or other financial goals. Second, it can help you compare different annuity options and features to find the one that best suits your needs. Finally, it can help you understand the potential risks and benefits of investing in an annuity.
It's important to note that an annuity calculator is only a tool and should not be used as the sole basis for deciding on purchasing an annuity. Other factors, such as taxes, fees, inflation, and market volatility, can also impact the performance of an annuity, so it's important to consult with a financial advisor before making any investment decisions.
Annuity as an Investment
You can think of a fixed-term annuity as an investment product. Unlike a High-Interest Savings Account or a savings account which is liquid, an annuity is often illiquid. That is to say, you cannot ask the annuity provider for your money back and should be patient to receive your money back slowly over many periods. The only way out would be to sell your annuity at a significant discount to its present value. In this respect, it is closer to a non-redeemable GIC.
Annuity as an Insurance
A life annuity is insurance against longevity risk. Longevity risk is the risk that one outlives retirement savings. Selling annuities is a specialty of life insurance companies. Life insurance protects the dependents of an insured person against the risk of premature death. Depending on the type of life insurance, when the person dies or if they die prematurely, the insurance company makes some payment to their designated beneficiaries. The earlier a life insurance holder dies, the more money the life insurance company will lose; the later they die, the more money the insurance company will make. It is exactly the opposite with a life annuity. The later an annuity holder dies, the more money the insurance company loses and the earlier they die, the more money the insurance company will make. Thus selling annuities is a natural hedge for a life insurance company and reduces the volatility of its earnings.
Disclaimer:
- Any analysis or commentary reflects the opinions of WOWA.ca analysts and should not be considered financial advice. Please consult a licensed professional before making any decisions.
- The calculators and content on this page are for general information only. WOWA does not guarantee the accuracy and is not responsible for any consequences of using the calculator.
- Financial institutions and brokerages may compensate us for connecting customers to them through payments for advertisements, clicks, and leads.
- Interest rates are sourced from financial institutions' websites or provided to us directly. Real estate data is sourced from the Canadian Real Estate Association (CREA) and regional boards' websites and documents.