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, go to: www.ssa.gov/oact/STATS/table4c6.html
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 4.10% on her money. (Note: The calculator assumes no “period certain” or residual value after life expectancy.)
