How to Convert Lifetime Annuity Payouts Into Annual Interest Rate

AP Photo: Eric Risberg AP Photo: Eric Risberg

Here’s a small Excel spreadsheet you can create to convert any single-premium annuity payout into an equivalent annual interest rate. (Boldface cells are for input.)

 

 

A

B

1

Premium

$100,000

2

Mo. Payment

$712.50

3

Period in Years

18.16

4

Monthly Rate

0.34%

5

Annual Rate

4.10%

 The formula to enter in output cell B4: = RATE((B3*12),B2,-B1))

The formula in output cell B5: = POWER(1+B4,12)-1

To estimate average life expectancy for males or females of any given age, using U.S. population mortality, click here.

 Example: A female age 67 is offered a lifetime annuity payout of $712.50 per month, for a $100,000 premium. She has a life expectancy of 18.16 years. If she collects payments until life expectancy, she will earn the equivalent of an annual interest rate of 4.1 percent on her money. (Note: The calculator assumes no “period certain” or residual value after life expectancy.)

About the Author
Rich White

Rich White

Writer and sales training consultant with 25 years of experience in the financial services industry, White is the author of "12 Steps to Your Personal Success in the 401(k) and Small Plan Market," the leading retirement plan sales program in the industry. You can reach him at 914-380-4522 or by email at richwhite8@yahoo.com.

Originally published on BenefitsPro. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Related Annuity Sales Strategies Resources

Powered by

  • Generation X and Millennials want this annuity ... and you should too.

    Whether you're selling to the traditional annuity market, or the overlooked Millennial and Generation X market, the safety, guarantees and astounding index credit offer all the market potential, without the risk. Watch this 2-minute video to learn more.

  • Boost Your Index IQ

    Whether you're a proven pro or you're just starting to learn about Index Universal Life (Index UL) insurance and Fixed Index Annuities, The Index Institute can help boost your index annuity sales.

Comments

Advertisement. Closing in 15 seconds.