By JLP | June 28, 2006
I put together a pretty simple spreadsheet (download) that will tell you your rate of return on a fixed immediate annuity. This spreadsheet works best for “life only” or “joint and survivor.” Naturally, if you choose the “life only” payout, your payment will be higher but will end when the annuitant dies. Also, although Vanguard gives you the opportunity to choose what percentage of the original payment the survivor will receive, it is assumed that the survivor will get 100% in this spreadsheet.
The first thing to do is to get a quote from Vanguard. I went in an played around with Vanguard’s Request a Quote and found it pretty easy to understand. Once you get your numbers, you can plug them into this spreadsheet (download), which is basically the same spreadsheet I used in my post titled The “Risk” With Fixed Immediate Annuities. This spreadsheet will tell you what your rate of return is based on how long you receive income from the annuity. The longer you receive income from the annuity, the better your return will be. However, if you die early, your return will not be so good.
Play around with the spreadsheet. If you have any questions or would like to recommend improvements, please let me know.