What is an Annuity quote?

Written by Hersh Stern Updated Tuesday, May 28, 2024

annuity quotes

It can be confusing to try to make sense of the different annuity quotes you find on the internet. Partially, that’s because there are at least six different types of annuities. You’ll need to understand how each type works before you can intelligently compare annuity quotes across groups. Even within each category there are additional bells and whistles which distinguish the products offered by competing insurance companies. This makes it almost impossible to compare annuity quotes from different companies across different types of annuities. So what can you do about this problem?

A good place to start would be to acquaint yourself with at least the basic elements of each of the six annuity types. Then you won't mistakenly compare apples and oranges. You will be able to narrow down the type of annuity quote that is most helpful in guiding you to meet your financial goals. This article provides a general overview of the six main categories of annuities, how they work, and how to interpret the quotes which illustrate their performance.

Lastly, please keep in mind that the some of the annuity types mentioned in this article also have both a "fixed" and a "variable" version. Knowing which version you're comparing may help eliminate some of the confusion.

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Simply enter your age, gender, select an income start date, and the dollar amount you have to invest. (If your want income paid over your and your spouse's lifetimes enter your spouse's age and gender, too.) Then click "Get My Quote." You'll instantly see an estimate of how much monthly income you can withdraw at your projected start date.

If you are in the market to purchase an immediate or a deferred income annuity be sure to get your free list of the top 10 quotes. By comparing rates you'll find the annuity with the highest income.

1. Immediate Annuity Quotes ("Fixed" Version)

With a fixed immediate annuity you can set up a steady income stream that you will never outlive no matter what happens to interest rates or the stock market. The payments can be made for your lifetime, for both you and your spouse's lifetimes, for a limited period of time, or for any combination thereof. Payments can be made to your beneficiaries upon your death if that occurred before the guaranteed period of the annuity expired. You can schedule your income to be received monthly, quarterly, or annually.

An immediate annuity purchase typically is irrevocable. When calculating an immediate annuity quote the insurance company actuaries consider your age and gender. The older you are, the higher your annuity income will be. Immediate annuity quotes are unlike other annuity quotes in that the insurance company typically does not disclose the interest rate used in its calculations.

2. Deferred Income Annuity Quotes

A deferred-income annuity (sometimes called a longevity annuity) combines the features of the above two annuities: immediate and deferred annuities. A deferred income annuity has both a growth period and an income distribution period. Essentially, with a deferred income annuity quote, you are shown the amount of income to be received at a future date. Purchasing a deferred income annuity contract usually defers income anywhere between three to thirty years from the time of purchase.

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If you die before the deferral period before income starts, some contracts provide a type of death benefit to beneficiaries. Others don't. Once income withdrawals begin the same beneficiary options which are available in an immediate annuity are often available with the longevity annuity.

A longevity annuity quote is very similar to an immediate annuity quote. The quote outlines the deferral period, the income option you've chosen, and the amount of fixed monthly (or annual) income you will receive once the payments begin.

3. Deferred Annuity Quotes ("Fixed" Version)

A deferrred annuity is an interest-bearing account similar in many ways to a bank certificate of deposit but not protected by FDIC. Deferred annuities are "manufactured" by insurance companies, not banks. You would typically review a list of deferred annuity quotes if you were interested in purchasing a growth product with a safe, guaranteed annual interest rate.

The number of years for which you can lock in an initial interest rate depends on whether you buy a "multiyear" deferred annuity or a "traditional" fixed interest deferred annuity. With a multiyear annuity you can choose from maturities that range from three to ten years. The interest rate stays in force for the whole period. With a traditional deferred annuity there is a first year interest rate guarantee but the rate in subsequent years is set by the insurance company at its discretion, so long as the future interest rate remains at least above the annuity's so-called floor rate or minimum guaranteed rate.

Today's Best
Multi Year Annuities

Click here for the complete
Deferred Annuity table
Company / Product Rate Yrs.
Equitrust LifeCertainty Select 10 5.60% 10
Pacific GuardianDiamond Head 9 5.50% 9
Equitrust LifeCertainty Select 8 5.50% 8
NassauMYAnnuity 7x 5.80% 7
Oxford LifeMulti-Select 6 5.70% 6
AmericoPlatinum Assure Series 5 5.65% 5
AmericoPlatinum Assure Series 4 5.55% 4
AspidaSynergy Choice 3 5.70% 3
AspidaSynergy Choice 2 5.45% 2

This is a table illustrating today's top interest rates for deferred annuities. The table lists the name of the insurance company, annual effective yield, and the number of years for which the yields are guaranteed. To learn more about deferred annuities click any line in the chart or call 800-872-6684 for quick answers.

What is usually shown on the internet for a deferred annuity quote is its current interest rate. Generally, the interest rate quoted is higher if you choose a longer growth period. If you should die during the growth period, your account values typically are payable to your beneficiaries.

If you need to withdraw some money from your deferred annuity before the maturity date, you can with most companies, so long as the dollar amount withdrawn is within your annuity's annual allowable withdrawal percent (usually 3% to 10% of the account value). If you withdraw a greater amount your account is assessed a surrender charge. Some companies also waive these charges in event the account owner is confined to a nursing home or is diagnosed with a terminal illness.

A deferred annuity quote or illustration will usually show the amount accumulated in your account at the end of each contract year. Because these are fixed interest rate products, you know up front what your return will be. A deferred annuity quote may also show the surrender charges per year for early withdrawals. Deferred annuity quotes differ from immediate annuity quotes because the rate of return is shown for the former.

4. Secondary Market Annuity Quotes

Sometimes, the recipient of a monthly annuity payment may decide to sell his present or future income stream if he needs instant cash. Such an annuity is referred to as a Secondary Market Annuity (SMA), where a contractual future cash flow is being sold by its owners in exchange for a lump sum today.

There are elements of secondary market annuities which are similar to immediate annuities, for example, when the purchased income stream begins immediately. There are also secondary market annuities which are similar to Longevity annuities, for example, when there is a delay in the income start date for five or ten years.

Today's Best
Secondary Market Annuities

Click here for the complete
Secondary Market Annuity table
Company Start Date Rate Cost
Berkshire Hathaway 2024-05-01 6.10% $93,404
AIG 2024-07-01 6.12% $205,130
USAA Life 2024-07-01 5.97% $521,536
Independent Life 2024-07-01 5.74% $162,847
Pacific Life 2024-07-01 5.60% $87,952
Berkshire Hathaway 2024-07-06 6.09% $138,887
Talcott Resolution 2024-07-10 6.00% $77,143

Secondary market annuity quotes consist of a rate of return, the company the annuity was purchased through, the cost to you, the start date of the payments, and the ultimate amount those payments will be based on. In the chart below is a list of currently available secondary market annuities, showing their rate, start date and purchase price. By clicking on the chart below, you will see the full range of products offered.

5. Fixed Index Annuity Quotes

A fixed index annuity is a growth annuity which is tied to a particular stock index. This is subject to a rate floor and a rate cap. The floor makes sure that no matter how badly the index does in a particular year, you will never suffer a negative return. In other words, even if the S&P dropped 50% your account balance would not show a loss. Your cost for this protection is that the insurance company only passes through to you a percentage of the possible gains in an up year. So a rate cap or participation rate cap, only allows your account to increase up to a certain point, usually between 3% and 7%. Rate caps and participation rates can also be reset each year by the insurance company. All index annuity earnings are tax deferred.

A fixed index annuity quote consists of several hypothetical situations. The illustration may show you by how much your account would have grown between 1995 and today if you have started back then. Again, the market-related performance of your fixed annuity is not guaranteed. This differs from fixed immediate and fixed deferred annuity quotes as those are always guaranteed. On the index annuity quote, you usually will be able to see what the value of your annuity would be if the index performs at its lowest levels, continues at its current levels, and how it has historically performed. A fixed index annuity quote may also include the surrender charges per year if you wanted to withdrawal from the contract before the maturity date.

6. Variable Annuity Quotes

A variable annuity is similar to a fixed index annuity, however, the biggest difference is that your account can drop way below the amount you started with in a variable annuity if the stock market collapses. Instead of being tied to an index, the performance of a variable annuity is tied to particular subaccounts which are tied to various mutual funds. It works similarly to a mutual fund but has certain tax-deferral advantages. You choose subaccounts in which you'd like to invest your premium, and your growth or losses are dependent on how well those funds perform. At the end of each year, maintenance fees and mortality charges are applied, and the account receives the difference between the amount earned and those fees. For instance, if your gain is 5% and the fees amount to 3%, then the growth applied will be 2%.

Variable annuity quotes are similar to fixed index quotes. Illustrations may show you hypothetical performance based on historical market movement. Variable annuity quotes differ from immediate and deferred annuity quotes in the same way as fixed index quotes do, by not showing you a guaranteed rate or amount. These quotes reflect the hypothetical performance of the subaccounts you choose.

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Comments (78)

  1. John
    2015-03-11 15:42:23

    I am researching annuities to see if they will work for me. I requested quotes at this web site. Are these the best that you have?

  2. Hersh Stern (ImmediateAnnuities.com)
    2015-03-11 15:44:05

    Hi John-

    Good to hear from you, too.

    The quotes we sent you were for an IMMEDIATE annuity (lifetime annuity with payments starting immediately and with beneficiary payments if you died before the end of 10th year). There were prices from 16 companies.

    You asked: Are these the best rates?

    They are if you're looking to buy an IMMEDIATE annuity.

    But depending on what you are trying to accomplish there may be other types of annuities with higher interest rates.

    For example--

    INDEX or HYBRID annuities can pay you as much as 8% a year. See here:


    SECONDARY MARKET ANNUITIES can pay you up to 6% a year. See here:


    Perhaps one of these annuities will better satisfy your retirement goals. Email me if you'd like more info.


  3. Owen
    2015-05-15 14:35:23

    Your company emailed me quotes for a $500k period certain immediate annuity for 10 years. I calculated the annuity internal interest rate and it was less than rate I can get on a 10-year Treasury Note. Why is that?

  4. Hersh Stern (ImmediateAnnuities.com)
    2015-05-15 14:37:28

    Hi Owen-

    The interest rate on a 10-year immediate annuity is lower than the rate on a 10-year bond for one important reason: When you invest $500k in 10-year treasury bonds you relinquish control over the $500k for all 10 years. In other words, the U.S. Treasury has the full use of the full $500k for all 10 years.

    When you buy a $500k 10-year period certain annuity from a life insurance company, the company does NOT have the full use of your $500k for the full 10 years. It cannot invest the $500k in a 10-year investment, because beginning with the first month on, the company has promised to pay you some of your $500k each month.

    If you did the math you'd find that the insurer only has on hand, on average, $250k (half your premium). You're right that the company starts with $500k in the first month but from that point forward each month the premium held by the company is reduced until the amount on hand reaches $0 at the end of the 10th year.

    Looking at this another way, a 10-year $500k period certain annuity (which amortizes the $500k evenly over 10 years) is really the mathematical equivalent of a 5-year investment with a constant value of $500k.

    You know that interest rates on shorter term bonds (for example, 5 year T-notes) are considerably lower than interest rates on longer 10 year bonds. This explains some of the differences in underlying interest rates between a 10-year Treasury note and a 10-year immediate annuity.


  5. John
    2015-06-22 14:49:00

    If I use my traditional IRA funds to buy a single premium immediate annuity do I pay tax when I withdraw money to buy the annuity? Is there a transition option to keep the money tax deferred?

  6. Hersh Stern (ImmediateAnnuities.com)
    2015-06-22 14:50:15

    Hi John-

    You can freely transfer money from your IRA to the insurance company. There is no tax due. The transfer is tax-free because the insurance company sets up a Traditional IRA account to receive the money. So this is really an IRA-to-IRA transfer.

    I've written a blog article about this topic here:


  7. Sam
    2015-06-24 11:45:14

    I prefer annuities which allow early withdrawal. Is that available with immediate annuities?

  8. Hersh Stern (ImmediateAnnuities.com)
    2015-06-24 11:45:42

    Hi Sam,

    On the quote spreadsheet we sent you you'll find small footnotes next to each company's name. Any company that has footnote number "5" allows for limited cash withdrawals. These companies include MetLife, New York Life, and Principal Financial, among others.


  9. Ulrich
    2015-06-24 11:46:12

    Thanks for your quotes. Do these numbers include ALL costs related to the annuity including commissions and fees?

  10. Hersh Stern (ImmediateAnnuities.com)
    2015-06-24 11:47:02

    Hi Ulrich-

    Immediate annuities and deferred income annuities do not charge fees. The commissions that we receive as agents are already built into your quotes for these types of annuities. Therefore, the quotes we sent you represented the exact dollar amounts you will receive.

    I've written a more detailed article on annuity commissions here:



  11. Colleen
    2015-07-24 12:17:46

    I received your list of annuity quotes. What % payouts are these companies paying?

  12. Hersh Stern (ImmediateAnnuities.com)
    2015-07-24 12:42:07

    Hi Colleen-

    You asked about the payout percentages for the different companies in your list.

    For this type of annuity called an "immediate annuity" which pays you for as long as you're living, the ultimate rate of return will depend on how long you lived and how many monthly payment checks you received. So that is not really knowable up front.

    I can give you a few estimates based on your life expectancy.

    At your age if you purchased the Minnesota Life annuity which was paying the highest amount on our list ($682 a month) and you lived to your normal life expectancy of 15.2 years, your rate of return would have been 2.80%.

    If you lived for 5 years longer, for a total of 20 years, then your return would have increased to 5.40%.

    Of course, if you selected a life only annuity and died after only 10 years then your return would have been negative.

    If you would rather guarantee yourself (and your beneficiaries) a definite interest rate return then you might consider a so-called period certain ("term certain") annuity which paid a minimum of, say, 20 years. That interest rate would be 3.00% regardless of how long or short you lived.


  13. Pete
    2015-07-27 08:31:01

    I got your quote, but it didn't seem competitive. I'm retiring from Lucent Technologies and they are offering me a lump sum pension buyout of $437,003.66. Alternatively they offered me a single life annuity of $3,858 per month. Your quotes we're less. Why?

  14. Hersh Stern (ImmediateAnnuities.com)
    2015-07-27 08:32:52

    Hi Pete-

    It makes perfect sense that Lucent's subsidized annuity will pay you more per month than the amount you would get if you applied the $437k premium to an insurance company annuity. Here's why:

    For the past 40 years, since ERISA was enacted in 1974, the vast majority of retirees who are offered a lump sum buyout vs. a monthly annuity, take the cash. These retirees want the cash to be able to invest in stocks or real estate, to pay down a mortgage, to take a vacation, to make home improvements, etc., etc.

    This is a well-known, well-studied tendency. So Lucent fully expects its retirees also to opt for the cash. Under ERISA (which is the law governing how to calculate a lump sum equivalent of a lifetime monthly income) a corporation is permitted to use certain above-market interest rates or discount rates when making this calculation.

    The upshot is that Lucent can use a higher than normal interest or discount rate to calculate the lump sum it owes you. Using a HIGH discount rate causes your lump sum amount to be SMALLER. Lucent knows this and since most of its employees will take the cash it's cheaper for Lucent to pay out lesser lump sums many times than the cost of an occasional employee electing to stay with the annuity. That's also why your $437k is just not enough premium to cover the same monthly income Lucent is quoting you. Lucent is actually subsidizing your monthly payments.


  15. Phil
    2015-07-27 08:34:35

    I have an IRA. I want to buy an immediate annuity and start receiving income at the beginning of the coming year so I don't pay any taxes on it this year. When should I contact you?

  16. Hersh Stern (ImmediateAnnuities.com)
    2015-07-27 08:36:10

    Hi Phil-

    Since the new year is more than six months away my first suggestion is that you continue to visit our website every two months or so and generate exact company quotes so you get a feel for the direction interest rates are taking.

    Regarding your question about when to start the process -- Keep in mind that your first month's payment will not be issued to you by the company until 30 days after it receives your premium. So depending on when you'd like to get that first payment, subtract one month from that date to cover the waiting period. Then allow another 2-3 weeks for the time it usually takes to transfer money from one custodian to another. This gives you a conservative planning horizon of about two months from start to finish.

    So if you wanted to receive your first payment, say, on January 2nd, then you'll need to begin the application process in early November.

    It's also important to know that most insurance companies give you a 60 day "rate lock" or grace period from when they receive your application to when the premium needs to be in-house. During that period even if interest rates drop, your annuity will be credited with the initial higher rate. Think of it like a mortgage commitment letter from a bank that gives you 30 days to close on a home while guaranteeing a specific interest rate.


  17. Brian
    2015-07-28 12:58:01

    I received your quote package in the mail Saturday. It was excellent. I also requested quotes from two other sources, all for a New York Life 10 Year Period Certain annuity. So far, I have received one of them with a large difference in the monthly payout than yours. Shouldn't they all be the same? Why aren't they?

  18. Hersh Stern (ImmediateAnnuities.com)
    2015-07-28 13:01:14

    Hi Brian-

    It's difficult to know without looking at the official NYL illustrations. Generally, NYL quotes should be the same for the same premium and payment options. I'll guess at some possible explanations:

    1. Are the quotes for the same payment options? Some agents may confuse a 10 year period certain annuity with a LIFE and 10 year certain annuity. The latter will pay you much less per month because at your age the expected payment period extends considerably past the initial 10 years.

    2. The quotes were not generated on the same day. When did you receive the other quotes? Since NYL changes its rates every so often, yesterday's quote may not be the same as tomorrow's if NYL made an internal adjustment to its interest rates in between.

    3. Are the start dates the same? The NYL quotes I sent you assumed a start date one month following purchase.

    Sometimes an agent may play tricks with the dates when they know a buyer is comparing quotes across different platforms or sources. For example, it's possible to make the income figure appear a little higher by delaying the start date. I'll explain.

    Imagine I sent you a quote with a purchase date today but an income start date a year from now. Your monthly income would be several percentage points higher than my first quote because NYL would be crediting your premium with a full year's delayed interest.

    Now I'd be shocked if the other quoter changed the start date by a year. But if he or she just fudged the start date by a week or two their quote would be a $5-$10 dollars higher than ours. Of course that would just be smoke and mirrors and not really giving you a better deal. But many consumers wouldn't understand this. They'd think they're getting a better quote.

    4. Did both sets of quotes assume your correct state of residence? Sometimes if the state of issue is different it can change the quote.

    5. Did both quotes correctly assume the tax status of your premium to be "qualified" money. Ours did since that's what you told us online.


  19. Andre
    2015-08-05 09:18:56

    Thank you for the quotes. I understand why the single life annuity quote gave me more income than the cash refund annuity. I don't understand why the cash refund annuity has a HIGHER taxable portion than the life only annuity if the monthly income amount from a refund annuity is smaller?

  20. Hersh Stern (ImmediateAnnuities.com)
    2015-08-05 09:27:42

    Hi Andre,

    Your inferences are correct. Unfortunately, my answer may not satisfy your underlying question.

    The taxable amounts for each of the annuities were calculated by the insurance companies based on guidance from the IRS. The companies have no discretion in this.

    The IRS formulas they use are outlined in IRS Publication 939 -- http://www.irs.gov/pub/irs-pdf/p939.pdf

    These formulas require an adjustment to the taxable income portion of a life annuity with guarantee period or cash refund. The adjustment combined with the fact that the income amount itself is determined by each company's specific actuarial assumptions causes the math anomaly you found between the two types of annuities.

    I realize this explanation doesn't really get to the root of your question but as they say, the math "is what it is." In other words, the calculations we gave you were correct and the insurance companies will report these same numbers to the IRS on the 1099-R's they send you in January each year.


  21. Chris
    2015-08-20 07:09:30

    It may be too complicated for an online tool but it would be nice if the options available to select in the quotes is 50% to the survivor, rather than 100%.

  22. Hersh Stern (ImmediateAnnuities.com)
    2015-08-20 07:09:54

    Hi Chris-

    Thanks for your suggestion. Over the years, we've toyed with different variations of the calculator. At one time we offered joint 50% quotes but found that users were very confused. Especially, since there are TWO ways that insurance companies administer 50% reduced annuities --

    (1) some reduce the income when the first of either annuitants dies, and
    (2) some reduce the income only when the primary annuitant dies, but not on the death of the secondary annuitant.

    So the comparisons across companies were not apples to apples even though the companies were calling their annuities "Joint & 50%".

    Perhaps we'll try this experiment again some time.


  23. H S.
    2015-09-04 11:45:54

    Does a Traditional IRA Single Premium Immediate Annuity with Payment Option Joint to Spouse + Period Certain (50% Joint to Survivor with a 10 yr certain) guarantee that the primary annuitant shall receive 100% of their monthly benefit amount for lifetime even if the spouse pre deceases them? I've received mixed feedback that if a spouse pre deceases the primary annuitant on a 50% joint to survivor policy, the primary annuitant's monthly benefit amount would be reduced to 50% opposed to receiving 100% for their lifetime.

  24. Hersh Stern (ImmediateAnnuities.com)
    2015-09-04 11:47:10

    Hi H,

    The correct answer is that it depends on how the insurance company interprets its contract. Some do not reduce to 50% during the 10 years. Others will. Find out from the company before you buy.

    Also there are two types of Joint and 50% reducing annuities: One type reduces on either death, meaning, whoever dies first causes the survivor to gets a reduced payment. The other type of Joint 50% reducing annuity only reduces upon the death of the PRIMARY annuitant. This type would NOT reduce if the survivor or secondary annuitant died first.


  25. Tim
    2015-10-15 08:02:01

    The premium is non-qualified. What amounts will I have to pay taxes on?

  26. Hersh Stern (ImmediateAnnuities.com)
    2015-10-15 08:02:21

    Hi Tim-

    In the quote chart you viewed at our web site, the column titled "Taxable Portion" is the amount on which you pay ordinary income tax.


  27. Gary
    2015-11-12 12:02:38

    Just a quick question, if I buy an income annuity can I make the monthly income payable to another family member?

  28. Hersh Stern (ImmediateAnnuities.com)
    2015-11-12 12:03:01

    Hi Gary-

    Most insurance companies permit you to direct the payments to a payee other than the owner or annuitant. It can be whoever you'd like and not limited to a family member. However, the owner of the policy will typically receive the Form-1099R at the end of the year and be required to pay income taxes on the taxable portion of the payments even though the owner was not the recipient of the income.


  29. William
    2015-11-16 13:45:41

    I want my premium to be returned to my beneficiaries at death.

  30. Hersh Stern (ImmediateAnnuities.com)
    2015-11-16 14:35:46

    Hi William--

    You requested quotes for an immediate annuity at our website. An immediate annuity will not return your full premium at death. At best, a cash refund immediate annuity will pay your beneficiaries the difference between what you received while living and the original premium amount. But no immediate annuity returns the full amount at death.

    Perhaps you should consider a multi-year guaranty deferred annuity (MYGA). These return your full premium and undistributed gains to your beneficiaries. You can read more about MYGAs here:



  31. James
    2015-11-19 11:19:58

    Please explain how the cash flow percentage is calculated.

  32. Hersh Stern (ImmediateAnnuities.com)
    2015-11-19 11:24:02

    Hi James--

    The cash flow rate (which is also referred to as the "payout" rate) is calculated by multiplying your monthly income amount by 12 and dividing that by the premium paid for your annuity. I'll give you an example:

    Say your annuity pays you $1,000 a month.
    In a year you would receive $12,000 (which is $1,000 multiplied by 12).
    If the premium you paid for your annuity was $100,000 then the cashflow rate would be:
    $12,000 divided by $100,000 which is 12%.

    Note, the cash flow rate is not the interest rate you are earning in your immediate annuity. To calculate the interest rate for an immediate annuity you need to know how many monthly payments you received. For a life annuity that would require you to know when you would be receiving your last payment.

    So for a life annuity, the true interest rate can only be known after the annuity expires which is when you die. You can estimate the interest rate for a life annuity by making assumptions about your life expectancy, in order words, estimating how many payments you might expect to receive using a projected mortality table.


  33. Don
    2015-11-19 12:30:20

    I have one question which is about the cash flow rates. Are these guaranteed for the life of the contract? If not for how long are they guaranteed?

  34. Hersh Stern (ImmediateAnnuities.com)
    2015-11-19 12:31:16

    Hi Don-

    Yes, the cash flow percentages on your report don't change because the underlying monthly income quotes on which they're based are also fixed.

    The cash flow percentages are calculated using the monthly income amount multiplied by 12 months and divided by the premium you paid for your annuity.


  35. Yvonne
    2015-11-23 14:51:34

    When the annuity refers to payments for life - is there a cut off - for example age 100 and does that vary per insurance company?

  36. Hersh Stern (ImmediateAnnuities.com)
    2015-11-23 14:52:10

    Hi Yvonne-

    There is no expiration or cut-off date to payments you receive under a Life annuity. All companies continue your payments for as long as you are living. The contract only ends upon your death.


  37. Thuy
    2015-11-24 10:17:17

    Does the type of immediate annuity (life, certain & life etc…) have an impact on the amount of each payment that is not taxable?

  38. Hersh Stern (ImmediateAnnuities.com)
    2015-11-24 10:45:13

    Hi Thuy-

    Yes. Since the non-taxable portion of each monthly payment is a product of the amount you spent for your annuity (your "premium") and the amount you expect to receive back over the term of your annuity. Since the different annuity payment options (life, certain & life, etc.) directly influences the amount of income you receive from your premium, the payment option you choose also directly affects the non-taxable/taxable ratio of each monthly payment. This idea is also known as the "exclusion ratio" concept.

    I'll explain what an exclusion ratio is in more detail for people who are not familiar with it:

    When an immediate annuity is purchased with after-tax money, the IRS refers to that transaction as a "non-qualified" purchase. This means that either the full premium or a portion of it had not previously "qualified" for exemption from income tax (hence, the phrase "non-qualified"). A typical non-qualified annuity would be one that you buy with money from a savings or checking account, Certificate of Deposit, inheritance, monies from the sale of a home, or an exchange from an existing non-qualified deferred annuity.

    Because a "non-qualified" annuity is comprised of monies which have already been taxed (i.e., "after-tax" money), the amount of new income taxes owed on your monthly annuity payments is based only on the NEW INTEREST you earn from your annuity. The portion of your monthly payment which represents the return of your initial after-tax premium is EXCLUDED from income tax so you are not doubled-taxed on your original premium.

    That PERCENTAGE of your monthly payment which is excluded from income tax is called the "EXCLUSION RATIO."

    The insurance companies calculate the exclusion ratios using a formula given to them by the IRS. That formula divides the original after-tax premium, or "cost basis," by the total expected payments you will receive over your lifetime (or the specified period of time) using the IRS' life expectancy tables designed for calculating these ratios.

    Now I'll simplify it for you. In the quote report I sent you, there's a column titled "Taxable Portion." This is the percent of each monthly payment which is considered by the IRS to be your gains or earnings in the annuity. In other words, the taxable portion is the amount of your monthly check MINUS the non-taxable portion (i.e., your original premium (or "cost basis") being returned to you that month).

    The "taxable portion" is fixed at the time you buy your annuity until the time when you have received back the total cost basis (or premium) in monthly installments. Generally, if you buy a life annuity and live beyond your initial life expectancy (determined when you bought the annuity) all payments from that point onward are considered gains or interest and are therefore fully taxable. (In other words, the exclusion ratio drops to 0% if you live past your life expectancy.)


  39. Dick
    2015-12-01 07:05:50

    I have a quick question. If my wife and I buy a joint immediate annuity, say for 5 years, is the return the same? It seems like it would be since it is just a contract for a fixed term but not sure.

  40. Hersh Stern (ImmediateAnnuities.com)
    2015-12-01 07:06:27

    Hi Dick-

    You are right. The payments from a 5 year period certain annuity are unchanged regardless of whether it has one or two owners. In fact, the quote for a 5 year period certain only annuity doesn't change regardless of the age of the annuitant or owners.


  41. Pat
    2015-12-02 07:45:36

    I recently printed a quote at your website for an immediate annuity. My question is about the monthly income column. Is this a gross income figure?

  42. Hersh Stern (ImmediateAnnuities.com)
    2015-12-02 07:46:13

    Hi Pat,

    Yes, that is the gross monthly income amount each insurance company will pay you. There is a column next to it titled "Taxable Portion." This is the amount of each payment which is considered taxable income. You owe income tax on the amounts in this second column.


  43. Robert
    2015-12-02 13:11:32

    I asked for a quote for a 15 year certain annuity. The initial online estimate showed a higher rate than the three quotes I received in my itemized report. How far can I trust your online calculator? Thank you for your attention.

  44. Hersh Stern (ImmediateAnnuities.com)
    2015-12-02 13:13:41

    Hi Robert-

    I checked the data you entered at our website--

    On the home page you entered your age as "81" and you selected an "Income Start Date" of "10 years."

    That told our computer that you wanted a quote which assumed you paid your premium today and let it grow for 10 years before you withdrew any payments. In other words, you would not be receiving income until you reached age 91 (i.e., your current age plus 10 years).

    The issue with these specifications is that the maximum age you can delay payments to is age 85, not age 91. In other words, because the insurance companies require you to start taking income at age 85, your premium will earn less interest than originally shown at our site. That's why we label those initial quotes as "Estimates" because they require insurance company approval to be considered "official."

    The itemized 9-page quote report you received, however, were based on payments starting at age 85. You can see that in the top line title of the quote page, which reads in a bold headline:

    * Income start date adjusted to maximum Deferred Income Annuity age 85

    There is an additional factor that sometimes causes the itemized quotes to be lower than the estimated quotes. That's due to a state premium tax. You live in the state of California. Your state's Treasury deducts 2.35% from the premium when you purchase this type of annuity.

    If you go back to our home page you'll see we did not ask for your state of residence. (That's because there's only so much personal information we can ask a web user to provide when they've only seen our home page.) So the 2.35% premium tax deduction is not considered in the initial quote estimator. The itemized quote report does deduct the state premium taxes and so those quotes are lower by 2.35%.

    BOTTOM LINE - you can trust the itemized quote report. Those numbers are accurate and exact.


  45. Don
    2015-12-11 07:57:44

    What is the cash flow column on your web site mean?

  46. Hersh Stern (ImmediateAnnuities.com)
    2015-12-11 07:58:52

    Hi Don-

    The "cash flow" rate is sometimes also called the "payout rate" at other websites or by various insurance companies.

    The cash flow rate is the percentage derived by dividing your annual income by your original premium amount. It's important to know that the cash flow rate includes interest plus return of principal.

    The cash flow rate is NOT your rate of return. Your rate of return is usually lower than the cash flow rate.

    Here's an example of how the cash flow rate is calculated:

    Say, you bought an annuity for $200,000 and your monthly income is $1,000. Your annual income is 12 times $1,000 which equals $12,000. Now take $12,000 and divide that by your premium (or, $200,000). The result is 6.00% which is the cash flow or payout rate.

    The cash flow rate remains constant throughout the life of the annuity except if your annuity included a rider which adjusts the monthly income periodically by the CPI or by a cost of living percentage.


  47. Ed
    2016-01-07 11:53:45

    How often will an installment refund be paid? Monthly, quarterly or some other period?

  48. Hersh Stern (ImmediateAnnuities.com)
    2016-01-07 11:55:31

    Hi Ed-

    An installment refund payment to your beneficiaries would generally be the same payment mode that you were receiving while living.

    So if your annuity is paid on a monthly mode to you then your beneficiaries would also receive payments on the monthly mode.

    Some companies may offer your beneficiaries a discounted lump sum in lieu of installment payments. Some companies also provide a checkbox on their application where you indicate that you do not want the company to offer your beneficiaries a lump sum payment option.


  49. Norma
    2016-01-08 12:23:22

    I may wait for my birthday to buy if there is a difference in the payout. Only interested in immediate, fixed, income for 5 years (maybe 10) but not life.

  50. Hersh Stern (ImmediateAnnuities.com)
    2016-01-08 12:24:44

    Hi Norma-

    The monthly income from the type of annuity you selected (which is called a 5 Year Period Certain or 10 Year Period Certain annuity) is not affected by your age.

    You are 79 years old today. You would receive the same amount of monthly income as an 80 year old would receive from a Period Certain annuity. Your age only impacts the monthly income received from a life annuity (where the payment amount is based on your life expectancy), not from a period certain annuity (where your life expectancy does not enter into the calculation of how much income you receive). A Period Certain annuity is really an interest-rate-only product.


  51. Frans
    2016-01-15 07:46:15

    Can payments be made to a foreign bank account?

  52. Hersh Stern (ImmediateAnnuities.com)
    2016-01-15 07:47:05

    Hi Frans,

    Yes, so long as the foreign bank is a correspondent of a major US "city center" bank. There are many of these. The insurance companies would send your payments to the US bank for benefit of your account at the correspondent foreign bank.


  53. Mary
    2016-01-20 07:48:31

    I retire in four months when my 403b funds will be available to me. What is the time frame from application to receiving a monthly check?

  54. Hersh Stern (ImmediateAnnuities.com)
    2016-01-20 07:53:48

    Hi Mary-

    The first check is due one month after the insurance company receives your premium. So if you apply for your annuity in three and a half months, the insurance company will request the rollover just in time for when your money is available (4 months). Allow a week for the check to transit from the 403b custodian to the insurer.

    Your first check will be paid to you a month later (if all goes smoothly).


  55. Perry
    2016-02-03 13:48:54

    Do you also sell index annuities? If so can you provide me a quote based on the immediate annuity information I entered at your website?

  56. Hersh Stern (ImmediateAnnuities.com)
    2016-02-03 13:52:39

    Hi Perry-

    I'm not sure what you mean by "index annuities."

    (1) Since you requested quotes for an immediate annuity with the income starting in two months I'm wondering if you were referring to a COST OF LIVING INDEX which can be purchased with an immediate annuity. Is this the index you have in mind?

    (2) There is a type of annuity called an "index annuity." You can read more about it here:


    But I don't think it's a good idea to invest in an index annuity if you are looking to receive income in two months. Typically consumers who buy index annuities are looking for their accounts to grow for a number years before they withdraw income.

    Since I'm confused about your question perhaps it would be best if you called to speak with one our customer service reps. I promise there will be no sales talk!


  57. Diane
    2016-02-09 13:32:58

    Should I wait to buy the immediate annuity until I am 75 which is in three months?

  58. Hersh Stern (ImmediateAnnuities.com)
    2016-02-09 13:34:40

    Hi Diane,

    I'll answer your question from the perspective that you already have researched annuities, consulted a fee-only financial adviser, and you are ready to buy the annuity but are only asking about the timing.

    On the quote lists we sent you, there are footnotes after each insurance company's name. Some of the footnotes refer to how these companies determine your age. You'll see that two of the companies (MetLife and Voya) will consider you to be a year older on your next birthday (in three months). So if you intend to buy your annuity from these two companies and if interest rates remain the same as or increase slightly above where they are today, then you should expect to lock in a higher monthly payment after your birthday.

    Of course, it's also possible that interest rates decline between now and your birthday so your monthly income may be lower in three months, despite your being considered a year older by these two companies. That may happen. Also you'll be missing a few payments, which can add up.

    Finally, it's really important to know that most of the companies on our quote list already consider you to be a year older right now! These are the companies that measure your age from the birthday you are nearest to. And since you are within six months of your next birthday, these companies are already crediting you with an increased income rate. These companies include: AIG, Mass Mutual, Penn Mutual, and Symetra.


  59. Bill
    2016-02-09 13:57:03

    I don't understand the difference between a period certain annuity (say, 10yr, 15yr, etc.) vs. a Joint Life annuity with Period Certain for the same period of time. Both types provide continuing payments for x years and if one person passes on, the insurance company still pays out to the beneficiary monthly until the period certain has been reached. But the cost of a joint life with period certain annuity is greater than a period certain annuity for the same time period. What am I missing?

  60. Hersh Stern (ImmediateAnnuities.com)
    2016-02-09 14:01:04

    Hi Bill-

    Here's the difference between the two payment options:

    A joint life annuity, even one that includes a period certain guarantee, has the potential to be paying income AFTER the period certain expires. That's because a joint life annuity continues to make payments so long as one or both of the annuitants are living. A joint life annuity with period certain will not stop making payments while an annuitant is living.

    Whereas, a period certain only (not joint life) annuity ALWAYS ENDS when the term certain period ends. So even if one or both of the annuitants were living after the period certain ended, no more income would be paid to the annuitants. This explains why the premium to purchase a period certain annuity will always be less than the cost of a joint life annuity with an equivalent period certain added on.


  61. Sally
    2016-02-16 14:54:16

    Am considering an immediate annuity for an ADD son having a hard time holding a job. What do you think?

  62. Hersh Stern (ImmediateAnnuities.com)
    2016-02-16 14:57:45

    Hi Sally-

    What you're suggesting is what I call a "spendthrift annuity purchase." Our firm has a lot of experience with these and we certainly can help you set one up.

    But, before I discuss the annuity approach, let me suggest that you also consult an attorney about setting up a "spendthrift trust" as an alternative. A trust typically costs several thousand dollars, requires a trustee, and there are annual maintenance costs. Since many advisers recommend using trusts instead of annuities I'm suggesting you learn about them so you can compare the two approaches.

    Perhaps the biggest drawback to using an annuity in your situation would be the potential for your son to cash it out, if you don't take the right precautions upfront. There are "factoring companies" that will pay him a cash lump sum at a steep discount for his annuity. You may have seen their advertisements on TV: The actor is singing "I have an annuity but I need cash now!" You'll want to keep your son from being able to undo your efforts.

    One way is for you to be the owner of his annuity. Yes, he'll get the monthly checks. But you'll control the registration of his contract and whether or not he is legally authorized to transfer it to a third-party.

    As owner, you will be responsible for the taxes on your son's annuity income. However, you can pass this obligation back to him (if that's what you want) by issuing him a "wash 1099" each year. Speak with your accountant. It's a simple filing you can do yourself online in 10 minutes or less.

    Another topic for discussion is who will be transacting the annuity? Is your son onboard with your goals? Can he handle the paperwork? If not, you might consider becoming his power of attorney (POA).

    I know this may now seem more complicated than when you started. But, I can help you set it up and I've done that many times for other parents, executors and trustees.


  63. Gerald
    2016-03-09 09:33:11

    I need quotes for a life annuity that pays monthly income in the amount of $700. Your calculator only accepts premium amounts. How do I do it?

  64. Hersh Stern (ImmediateAnnuities.com)
    2016-03-09 09:33:51

    Hi Gerald-

    We do have an online calculator that let's you enter an exact monthly income amount to solve or the premium amount.

    On the home page under the yellow "GET MY QUOTE" button there's a sentence which reads:

    "Find advanced calculator options here."

    Click the link to go to a page where you can generate a quote based on any income amount.


  65. Al
    2016-03-09 09:34:10

    Can I get a quote with a CPI increase to payment?

  66. Hersh Stern (ImmediateAnnuities.com)
    2016-03-09 09:41:40

    Hi Al-

    The answer is yes. As you enter your information to create an instant quote, there's an option to add a Cost of Living (COLA) calculation by checking a box and selecting a COLA option from a pull-down menu. One of the options is "CPI."

    To review, here's what you see on that page:

    "For quotes both with and without a Cost Of Living Adjustment (COLA), check the box and select a COLA Percentage. Your choices are:



  67. Charles
    2016-03-22 08:30:38

    I'm 72. I have $37K and I want to buy a cash refund deferred income annuity that starts paying me in 10 years. How much would remain for my beneficiary if I died at 95 years old?

  68. Hersh Stern (ImmediateAnnuities.com)
    2016-03-22 08:31:45

    Hi Charles,

    Our best offer for someone your age is from Guardian Life at $523 a month. Say you bought this annuity and received income from it for 13 years (from ages 82 thru 95). The total you received would have been $81,588.

    Since you paid $37,000 for the annuity and only that amount is guaranteed under a cash refund option, if you died at age 95, your beneficiaries would not receive any refund payment.


  69. Bob
    2016-03-25 14:27:25

    I am 67 and plan to purchase a deferred income annuity. I would be receiving income at age 69 and 8 months. Do I have any RMD calculations/issues since my start age is less than 70?

  70. Hersh Stern (ImmediateAnnuities.com)
    2016-03-25 14:28:15

    Hi Bob-

    There are no RMD issues as long as you buy a "life contingent" deferred income annuity and start receiving income any time prior to reaching age 70-1/2. Additionally, if your annuity satisfies the QLAC requirements you could even set the income start age to as late as age 85 and still be in compliance with the RMD rules.

    I've written a detailed article about RMDs which I hope you'll find informative. You can read it at this link:


    Also, more about QLACs here:



  71. John H.
    2018-10-03 11:05:13

    Can you update the quotes you sent me yesterday with a 15 year period certain payout based on 100k?


  72. Hersh Stern (ImmediateAnnuities.com)
    2018-10-03 11:05:51

    Hi John-

    I am responding to your request for updated quotes for a "15 year period certain payout" with two sets of numbers because the phrase "15 year period certain payout" can be interpreted in two different ways. I wanted to be sure you knew the difference between them.

    When you initially requested quotes at our website, you checked the box for a Single Life annuity with 15 Years Certain. That's the type I previously sent you quotes for. A life with 15 years annuity provides the following benefit:

    You receive income for as long as you are living, even after the 15 year period ends. If you should die before the end of the 15 years, payments continue to your beneficiaries until the end of the 15th year. Payments stop only upon your death after the end of the 15th year.

    There is a second type of 15 year immediate annuity which DOES NOT pay for your lifetime. It is called a "15 Year Period Certain" annuity (your exact wording) which has the following definition:

    You receive income only for 15 years. If you should die before the end of the 15 years, payments continue to your beneficiaries until the end of the 15th year.

    But if you live longer than the 15 years you will not receive further income. This income stream ends exactly at the 15 year mark.

    At age 64 your life expectancy is longer than 15 years. So when you compare quotes for the two types of 15 year annuities you find that the 15 Year Period Certain annuity gives you more income per month than the Single Life annuity with 15 Years Certain would give you. That's because the insurance company expects to make fewer payments to you in a 15 Year Period Certain annuity than it does if your annuity was set up to pay you for life, even if lived longer than 15 years (which the actuarial tables say you will).

    So to cover all bases, I sent you quotes for both types which you can compare to find the one that is more suitable to your financial goals.

    I hope I've made myself clear. Please contact me again if you have any questions about these annuities.



  73. James
    2018-11-21 09:53:31

    My wife & I have some questions about the annuity options you mailed to us. I am 80 & she is 71. We still have some major questions about annuities in general.

    All over the internet you can find annuities offering 7% returns. Since a substantial portion of the monthly income is the investor's own money, this is not a true return. True returns or yields are the actual amount of earnings your investment returns.

    For example, You can ladder 1, 2, 3, 4 & 5 year CD's & earn a blended interest return of 2.9%. When you sell them, you get all of your money plus the earned interest you agreed to when you made the investment.

    Insurance companies have a habit of making annuities so complicated it takes an investment professional with a PHD to understand them. Unfortunately, there are many uniformed investors who upon hearing 7%, eagerly jump to sign the contract without really knowing what they are getting. Some then brag to their friends about what a good deal they got because they think they're getting double the current rate for conservative investment products.

    What I need to see is a table which charts year by year loss of principal vs. monthly payments. Even if the investor & the insurance company were each giving 3.5%, the value of this investment is questionable. I can get 3% on a CD ladder which in truth is likely better than the annuity provider is giving. In addition, I have total access to 20% of my money each year which like an annuity is guaranteed.
    I'm eager to get to the nitty gritty on annuity contracts, but until I see more compelling evidence that these products are substantiality better than a CD ladder, I'll choose the CD ladder & retain 100% control of my money. You may argue that annuity payments are guaranteed for the rest of your life & that is somewhat valid, but it's a crap shoot. You're gambling on how long you'll live.

    Please send us some real data that answers the questions I've posed. If I don't hear from you, I'll consider that my assumptions are correct & your company realizes that I'm probably not an annuity customer. If I'm wrong, I'd be delighted to hear from you.

  74. Hersh Stern (ImmediateAnnuities.com)
    2018-11-21 09:54:00

    I'll try to address your questions with regard to Immediate Annuities, but please let me know if I've left something out.

    I see you ran Immediate Annuity quotes at our website for Joint Life Only and Joint Life with Cash Refund payout options. With these types of annuities you are right in your understanding that you lose control of your premium in exchange for a guaranteed lifetime income that lasts as long as either you or your wife are alive. As well, the 'cash flow' rate does not represent an interest rate; it is simply the percentage of your premium that is paid back to you each year.

    We aren't given an interest rate by the insurance companies. Because of that, we cannot give you an amortization schedule for an immediate annuity. The main reason for this is that your earnings depend on how long you or your wife live. With the Joint Life Only option, if you were to both die before your premium is paid back to you, you would lose money. If this same scenario happened with the Joint Life with Cash Refund option, your effective interest would be zero (return of premium only). It's only if you live past the point where you've received your premium back in full that you begin making money.

    An Immediate Annuity is a form of life insurance designed for people who are afraid their money may not last as long as they live. As a result, Immediate Annuities are not right for everyone and may not be right for you either.

    There is a type of annuity called a Multi-Year Guarantee Annuity where you are guaranteed a fixed interest rate for a fixed number of years.

    You can see current rates here:https://www.immediateannuities.com/deferred-annuities/

    There are a few notable details with a Multi-Year Guarantee Annuity:

    - Your money grows tax-deferred (applies only to post-tax money)
    - Most companies allow withdrawals of interest and/or up to 10% of the accumulation value
    - Insurance companies hold these contracts which are not FDIC insured

    Multi-Year Guarantee Annuities are a popular annuity product among people who are looking for guaranteed returns instead of guaranteed retirement income.

    I hope I've answered your questions to your satisfaction. Please call us at 800-872-6684 if you have any other questions or would like to discuss anything else.


  75. Margaret
    2019-05-15 08:46:58

    My husband has an IRA with Fidelity and they have quoted me a 20 year Certain annuity for him with Principal. When I go into your site and use the Annuity Calculator the amount is higher than what he was quoted. Are your rates estimated since I also received a quote from another source and they were only a few dollars higher than Principal?

  76. Hersh Stern (ImmediateAnnuities.com)
    2019-05-15 08:48:08

    The quotes you received are not estimates. They are actual quotes which you could use to apply for each one of the annuities shown. If you are viewing quotes from other sources, you need to make sure that all of the inputs are identical. For example, if the other source is using a slightly different premium amount or a different income start date that can alter your quote slightly.


  77. Sally Jo B.
    2023-10-14 13:08:55

    Once i fill out application is the interest rate on a 20 year period certain annuity locked in

  78. Kyle
    2023-10-16 09:49:01

    Hi Sally Jo,

    Thank you for reaching out.

    In order to lock in your rate, your annuity application needs to be submitted to the insurance company before your quote expires. Quotes are normally valid for 1-2 weeks from when they are run, and you'll see the expiration dates posted on the quotes you receive through our website.

    If you have additional questions, please give us a call on our toll-free number, (800) 872-6684. We'll be very happy to help!

    Best regards,