Deferred Fixed Annuity Calculator
Model the accumulation phase of a deferred fixed annuity: guaranteed-rate growth, the year-by-year surrender charge schedule, the 10% free withdrawal allowance, and market value adjustment (MVA) — then compare your surrender value against a CD.
Contract inputs
Surrender charge schedule (% per contract year)
Results
Year-by-year illustration
| Year | Rate % | Accumulation | Free w/d (10%) | Charge % | Penalty | MVA adj | Surrender value | CD value |
|---|---|---|---|---|---|---|---|---|
| Press Calculate to run the illustration. | ||||||||
Surrender value vs CD — exit year 5
Modeling the payout phase (immediate annuities, lifetime income, payout rates)? That is the job of our annuity calculator — this page covers only the deferred accumulation phase.
How the MVA illustration works
A market value adjustment protects the insurer when interest rates move. In this illustration:
- Rates rose (market rate above your guaranteed rate): MVA is negative — your surrender value drops, because the insurer must sell bonds at a loss to pay you.
- Rates fell (market rate below your guaranteed rate): MVA is positive — your surrender value rises.
- The raw adjustment is (guaranteed rate − market rate) × remaining years in the surrender schedule, clamped to ±10% of surrender proceeds. Once the schedule ends, MVA is 0.
Real MVA formulas are contract-specific (often tied to a published index and sometimes uncapped on one side). Treat this as a directional illustration, not your contract terms.
Frequently asked questions
What is a deferred fixed annuity?
A deferred fixed annuity is a contract with an insurance company. You pay a premium (lump sum or series of payments), it grows at a fixed interest rate during an accumulation phase, and payouts start at a later date you choose. It differs from an immediate annuity, which starts payments within about a year of purchase.
How do deferred fixed annuity surrender charges work?
Surrender charges are penalties for withdrawing more than the free amount during the early contract years. They follow a declining schedule, for example 7 percent in year 1, 6 percent in year 2, down to 0 after the schedule ends. The charge applies only to the amount above the free withdrawal allowance, and each contract year the percentage steps down until it reaches zero.
What is a market value adjustment (MVA) on an annuity?
A market value adjustment changes your surrender proceeds based on interest rate movements since the contract started. If rates rose, the MVA typically reduces what you receive; if rates fell, it can increase it. The adjustment usually applies only during the surrender charge period and is often capped. This calculator models MVA as an illustration of rate change times remaining years in the schedule, clamped at plus or minus 10 percent.
What is the free withdrawal allowance on a fixed annuity?
Most deferred fixed annuities let you withdraw a percentage of the account value each contract year, commonly 10 percent, without paying surrender charges. Withdrawals above that amount trigger the surrender charge for that year. This calculator applies your chosen free percentage before computing the penalty.
What is the difference between the guaranteed rate and the renewal rate?
The guaranteed rate is locked for the initial guarantee period, for example 5 years at 4.5 percent. After that, the insurer declares a renewal rate each year, which can be lower, but contracts usually include a minimum guaranteed floor. This calculator lets you enter both rates so you can see growth after the guarantee period ends.
Fixed annuity vs CD: which grows more?
It depends on the rates, taxes, and how long you stay. CDs pay interest that is taxed every year, while annuity earnings are tax-deferred until withdrawal, so the annuity can pull ahead even at a slightly lower rate. The annuity can fall behind if you surrender early and surrender charges apply. The comparison section on this page computes both paths so you can see the breakeven year.
Are fixed annuity earnings tax-deferred?
Generally yes in the United States: earnings grow tax-deferred until you withdraw. Withdrawals are taxed as ordinary income on the earnings portion first, under last-in-first-out rules, and withdrawals before age 59 and a half may face an additional 10 percent IRS penalty. Tax rules vary by country and contract type, so confirm with a tax professional.
What happens if I surrender a deferred fixed annuity in the first year?
You receive the account value minus the highest surrender charge, minus any market value adjustment if the contract has one. For example, a 100,000 premium at 4.5 percent with a 7 percent year-1 charge and a 10 percent free withdrawal surrenders for about 97,917, which is less than the premium you paid. Early surrender almost always means getting back less than you put in.
Can a market value adjustment increase my surrender value?
Yes. If interest rates fell since you bought the contract, the MVA is positive and your surrender proceeds increase, subject to the contract cap. If rates rose, the MVA is negative and reduces your proceeds. Toggle MVA on in this calculator and set the current market rate to see both directions.
How safe is a deferred fixed annuity?
The guarantee is only as strong as the issuing insurance company, so check its financial strength ratings. Fixed annuities are not bank deposits and are not FDIC insured. Most US states have guaranty associations that provide limited protection, with coverage caps that vary by state. Diversifying across highly rated carriers is a common way to manage this risk.
When does surrendering early break even against a CD?
Surrendering breaks even when the surrender value, after charges and any MVA, is at least as large as what an after-tax CD would have grown to over the same period. With typical declining schedules this often happens around year 2 to 4, but a high early charge or a negative MVA can push it later. This calculator finds the exact breakeven year for your inputs.
Is this deferred fixed annuity calculator financial advice?
No. This calculator produces mathematical estimates for education and planning only, not financial, tax, or legal advice. Real annuity products involve insurer credit risk, contract-specific fees, state guaranty limits, and tax rules this tool does not model. Consult a licensed financial professional before making decisions with real money.
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