FAQ

To calculate the present value of an annuity, multiply the payout amount by the number of payouts by the interest rate per payout.

To calculate the future value of an annuity, multiply the initial principal used to purchase the annuity by the monthly contribution by the number of years to the payout by the annual yield.

While there are usually no strict lower limits, the typical upper limit set by insurance companies is 95. Annuities are not recommended for those under 40. The average age of first-time annuity buyers is 50.

Lump-sum distribution from an annuity is taxed at ordinary income rates. If the contract is annuitized, meaning that distributions are made each month, quarter, or year, the portion of the distribution that represents earnings is taxed as income. In all cases, remember that only income is taxed, never principle

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