Wondering how an annuity fits into your Canadian retirement strategy? Our annuity calculator helps estimates your potential income from annuity payments and helps provide comparison with investments such as Registered Retirement Income Funds (RRIF) and Guaranteed Investment Certificates (GIC).
How does this annuity calculator work?
This annuity calculator helps to calculate the present value of all expected annuity payments. For this you will need to enter your life expectancy, the payment frequency, annual interest rates, the initial value of the annuity investment as well as when the first payment will happen. These factors will be used to calculate the present value, which means what the total expected payments are worth today.
It also works to calculate the expected annuity payment each month.
Annuity definitions
To help understand how each annuity works there are some good definitions that you should know related to the annuity type, the timing of payments as well as the payment structure.
When it comes to the type of annuity you can purchase there is life vs. fixed. A life annuity will provide payments until the death of the annuity holder or their spouse. Where a fixed annuity will provide payments for a specific number of periods before stopping.
Next is when the payments will start which would be immediate or deferred. In an annuity with immediate payments the annuity will start making payments after the annuity is purchased. Where as with a deferred annuity the payments will start in the future.
Annuities can either make fixed or variable payments. Fixed payments are predefined and will pay out the same amount each period as specified in the annuity. Where as variable payments will be made based on the performance of the annuity.