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How Do You Calculate the Return on a Fixed Immediate Annuity?

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.

Topics: Calculators, Financial Planning, Personal Rate of Return | 3 Comments »

3 Responses to “How Do You Calculate the Return on a Fixed Immediate Annuity?”

  1. Avilynn (Vig) Says:
    June 29th, 2006 at 6:18 pm

    JLP, see my reply to your post at the DH 51’597

  2. Free Money Finance Says:
    June 30th, 2006 at 5:31 am

    Star Money Articles for the Week of June 26

    Here are interesting posts and news this week from the MoneyBlogNetwork members and beyond: Blueprint for Financial Prosperity notes that mutual funds are good for mutual funds. Consumerism Commentary announces Quicken 2007. AllFinancialMatters tells h…

  3. Joanne Says:
    July 18th, 2006 at 9:55 am

    I also trying to get answer for this post.
    Thank you