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.)
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