Retirement Income Tool
Annuity Decoder
Decode annuities — Immediate vs Deferred, Single vs Joint, with vs without Return of Purchase Price. See the IRR of each option.
Purchase & Ages
Annuity Type
Life Option
Lump sum back to nominee on death — lower payout
Tax Slab (on Annuity Income)
Annuity income is taxed as "Income from Other Sources" at your slab.
Assumptions
Your Selected Variant
Compare 6 Variants
| Variant | Rate | Monthly | Lifetime Payout | ROP Return | Pre-tax IRR | Real IRR |
|---|---|---|---|---|---|---|
| Immediate • Single • No-ROP | 7.50% | ₹31,250 | ₹75.0 L | — | 5.56% | -2.46% |
| Immediate • Single • ROP | 6.20% | ₹25,833 | ₹62.0 L | ₹50.0 L | 6.62% | -0.98% |
| Immediate • Joint 100% • No-ROP | 7.20% | ₹30,000 | ₹83.5 L | — | 5.79% | -2.06% |
| Immediate • Joint 100% • ROP | 5.90% | ₹24,583 | ₹68.4 L | ₹50.0 L | 6.23% | -1.21% |
| Deferred 10y • Single • No-ROP | 10.50% | ₹43,750 | ₹63.0 L | — | 2.59% | -4.43% |
| Deferred 10y • Single • ROP | 9.20% | ₹38,333 | ₹55.2 L | ₹50.0 L | 4.76% | -2.25% |
IRR Across 6 Variants
Payout Recovery Over Time
Insights
The ROP myth: Adding Return of Purchase Price reduces your pre-tax IRR by roughly -1.1% and costs you about ₹5,417/month less income for life. The "principal return" feels safe but is fully paid for by you — it is not free.
Joint Life premium: Joint Life 100% costs ~-0.23% IRR vs Single Life. You are buying insurance for your spouse's survival — worthwhile if spouse has no other income, wasteful if they do.
Deferred trade-off: Deferred 10y gives 10.50% rate vs Immediate's 7.50% — but you sacrifice 10 years of income. Break-even is often 18-22 years into the annuity. Works only if you have other income for the deferral window.
After tax reality: At your 20% slab, your real post-tax, post-inflation yield is only -2.46%. Annuities offer certainty but poor tax efficiency — an SWP from debt/hybrid MFs (equity LTCG 12.5% beyond Rs 1.25L, Budget 2024) can often outperform on post-tax real returns, though without the guarantee.
CFP Note
Annuities are among the most misunderstood retirement products. The "ROP feels safer" bias costs most retirees 15-20% lower lifetime income. For flexible income with better returns, an SWP from debt/hybrid mutual funds (Regular Plan via MFD) combined with adequate term insurance may outperform — and you keep full control of your capital. Speak to your Trustner Relationship Manager before locking in.
Should you buy an annuity, or run an MF SWP instead?
Your Trustner Relationship Manager will stress-test this annuity quote against a matched SWP strategy so you see the true lifetime income comparison.
Disclaimer: Mutual fund investments are subject to market risks. Read all scheme-related documents carefully before investing. Past performance does not guarantee future returns. Annuity rates shown are indicative 2026 benchmarks and vary by insurer (LIC, HDFC Life, ICICI Pru, SBI Life, Max Life). Actual rates depend on age, purchase price, option chosen and current bond yields. Annuity income is fully taxable as Income from Other Sources. This calculator is illustrative and does not constitute financial or insurance advice — consult a qualified advisor before purchase.
Annuities — turning a lump sum into a guaranteed lifelong income
An annuity is a contract where you hand over a lump sum and, in return, receive a fixed income — often for the rest of your life. Its appeal is certainty: the payment does not depend on markets, so it removes the risk of outliving your money. The trade-offs are a generally lower effective return, little or no liquidity once you buy, and payouts that are taxable as income.
This calculator estimates the monthly income a given corpus could buy at an annuity rate. In a retirement plan, an annuity is often used to cover a floor of essential expenses with guaranteed income, while the rest of the corpus stays invested (or is drawn via an SWP) for flexibility and growth — rather than annuitising everything.
How this calculator works
- 1Enter the lump sum you would annuitise and an annuity rate.
- 2The calculator estimates the periodic income it would provide.
- 3Compare that guaranteed income against drawing from the corpus yourself via an SWP.
Frequently asked questions
What is an annuity?
An annuity is a product, usually from an insurer, that pays you a fixed regular income in exchange for a lump sum. Depending on the option chosen it can pay for your lifetime, for a fixed period, or continue to a spouse. Its main benefit is a guaranteed income that does not depend on markets.
Annuity or SWP — which is better for retirement income?
An annuity guarantees income for life but typically at a lower return, with no liquidity and taxable payouts. An SWP from a mutual fund is flexible and often more tax-efficient, but the income is not guaranteed and depends on markets. Many retirees use an annuity for a guaranteed floor and an SWP for the flexible remainder.
Are annuity payouts taxed?
Yes. Annuity income is generally taxable as income in the year you receive it, at your slab rate. This is one reason to compare an annuity’s after-tax income against alternatives like an SWP, where only the gains portion of each withdrawal is taxed. Confirm the specifics with a Chartered Accountant.
Insurance is the subject matter of solicitation. Illustrative only; annuity rates and tax treatment vary — confirm with the insurer and a tax professional.
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