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Annuity Grade Calculator

Enter the four numbers on your annuity quote and get the implied annual rate of return, a letter grade against fixed-income benchmarks, and a side-by-side comparison to current MYGA and Treasury rates. Nothing is stored. No account required.

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Educational tool only. Results are hypothetical and not personalized advice. Actual credited interest depends on contract terms, carrier resets, and future index behavior.

Annuity Grade Calculator

Enter your annuity terms to calculate the true implied rate of return and see how it stacks up.

Your Annuity Terms

$
years
$
years

Try an Example

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Enter your annuity terms and hit Calculate

Market Benchmarks

How your implied rate compares

5-yr MYGA (top rate)(Pacific Life Pacific Harbor 5-year $200k+ rate — ria.pacificlife.com (Pacific Life Advisory), effective 2026-04-16 (2026-04-16))
5.15%
10-yr Treasury(FRED DGS10 (10-Year Treasury CMT) (2026-04-17))
4.35%
5-yr CD national average(FDIC National Rates and Rate Caps (5-year CD, national average) (2026-04-15))
1.85%
S&P 500 historical avg(NYU Stern — Historical Returns on Stocks, Bonds and Bills (1928–present) (2026-01-01))
10.00%

Grading Scale

A+
≥ 8.00%
Exceptional
A
6.00 – 7.99%
Strong
B
4.00 – 5.99%
Fair
C
2.00 – 3.99%
Below avg
F
< 2.00%
Poor
Considering a Fixed Indexed Annuity instead?

The Index Performance Calculator lets you model how cap rates, spreads, and participation rates have historically affected credited returns across 64 FIA indexes — with a side-by-side comparison and $100K growth chart.

This tool calculates the implied annual rate of return using the deferred annuity present value formula solved via Newton-Raphson iteration. It assumes fixed monthly payments over a finite term. Results are hypothetical estimates for educational comparison purposes only and do not constitute personalized financial advice.

How this calculator works

Most annuity quotes advertise a monthly payout and a duration. What the buyer actually wants to know is the implied annual rate of return — the single fixed rate that reconciles the lump-sum premium, any deferral period, and the stream of future monthly payments. This tool solves for that rate and assigns it a letter grade.

The IRR calculation, in plain English

The solver uses the deferred-annuity present-value formula with monthly compounding (12 periods per year). Starting from an initial guess of 4% when total lifetime payout exceeds the premium (or −1% when it does not), Newton-Raphson iteration converges the annual rate r at which the present value of all monthly payments — discounted back through the payout period and then through the deferral period — equals the premium. Convergence tolerance is 1e-8; the solver caps at 500 iterations and rejects any candidate whose recomputed present value drifts more than 1% from premium.

How grades are derived

  • A+ — implied rate ≥ 8.00%. Exceptional, top of market.
  • A — 6.00% ≤ rate < 8.00%. Beats most fixed-income benchmarks.
  • B — 4.00% ≤ rate < 6.00%. Fair — competitive with CDs/Treasuries.
  • C — 2.00% ≤ rate < 4.00%. Below average — shop around.
  • F — rate < 2.00%. Poor — likely a bad deal.

All thresholds are inclusive of the lower bound. Full grading methodology and the benchmark data sources are documented on the methodology page.

Key assumptions and limitations

  • Monthly compounding; level monthly payments over the full payout duration.
  • A single deferral period before payments begin. Zero deferral = immediate annuity.
  • Surrender charges, rider fees, MVAs, and premium bonuses are not applied to the displayed IRR. Compare them separately.
  • The grade is a rate-of-return grade only. It does not evaluate carrier financial strength, liquidity, or income-rider roll-up mechanics.
  • FIA illustrations are hypothetical. For an FIA, the monthly payout you input is itself a projection; the implied rate inherits that hypothetical status.

Frequently asked questions

What does the Annuity Grade Calculator actually compute?
It takes four numbers you already see on any annuity quote — premium, deferral period, monthly payout, and payout duration — and solves for the single fixed annual rate of return that makes those cash flows balance. That implied rate is the comparable number. A quote that promises “$2,100 per month for 20 years on a $200,000 premium” is only impressive if the implied return beats the Treasury or MYGA rates you could get instead.
How is the internal rate of return calculated?
We use Newton-Raphson iteration on the deferred-annuity present-value formula with monthly compounding (12 periods per year). The solver starts at 4% if the total payout exceeds the premium and at −1% otherwise, converges to a tolerance of 1e-8, caps iterations at 500, and rejects any result where the recomputed present value drifts more than 1% from the premium. Output is displayed as an annualized percentage to two decimals.
How are the letter grades assigned?
Grades are a fixed function of the implied rate: A+ at 8% or higher, A at 6–8%, B at 4–6%, C at 2–4%, F below 2%. All boundaries are inclusive of the lower bound (≥). A quote at exactly 8.00% grades A+, at 7.99% grades A, and so on. The thresholds are anchored to long-run fixed-income benchmarks — a B grade is roughly parity with top MYGA and CD rates; an A+ is materially above them.
Why does the result show a comparison to a MYGA rate?
Because the right question is not “is this annuity good” but “is this annuity better than the alternative I could buy today.” We show your implied rate vs the top published 5-year MYGA rate and report the delta in percentage points. A quote that underperforms a liquid MYGA is usually a poor trade regardless of grade.
What assumptions does the Income calculator make?
Monthly compounding. Level monthly payments for the full payout duration. A single deferral period before payments start. No surrender charges, rider fees, or MVAs applied to the displayed IRR — those should be compared separately. The grade is a rate-of-return grade only and does not evaluate carrier credit, liquidity, or income-rider roll-up mechanics.
How is the Index Modeler different from the Income calculator?
The Income tab values what a carrier has offered you in writing. The Index Modeler does the opposite — it applies the crediting levers (cap, spread, participation, floor) to 64 real historical index return streams so you can see how an FIA with those terms would have credited across past years. The modeler is backward-looking historical context, not a forecast.
Is the implied rate a guaranteed return?
No. For a fixed income or SPIA quote with a published payout, the implied rate is the mathematical consequence of the contract you sign — it is as good as the insurer’s promise. For an FIA illustration, the displayed “payout” is itself hypothetical, so the implied rate is hypothetical too. We label it "Hypothetical" in the result card for that reason.
What does the calculator not do?
It does not personalize to your tax situation. It does not evaluate carrier financial strength. It does not price income-rider benefit bases or step-ups. It does not decide whether you should buy an annuity at all — only whether one specific quote is mathematically competitive with fixed-income alternatives.
Why is there an oversized green indicator on some grades?
Known UI bug on A+, A, and B grades — the grade-display style is not loaded, so the letter renders at the browser default size. The math behind the grade is correct. Scheduled for a dedicated UI polish pass after Phase 3 parity is verified.
Is this financial advice?
No. This is an educational comparison tool. Results are hypothetical and do not constitute personalized investment, tax, or legal advice. Speak with a licensed fiduciary before committing premium.

Related reading

Disclaimer. This calculator is an educational tool. Results are hypothetical illustrations and do not constitute personalized investment, tax, or legal advice. Actual credited interest depends on contract terms, carrier resets, surrender schedules, and future index or rate behavior. Speak with a licensed fiduciary before committing premium.