The Income Annuities page lets you add annuity income streams - contracts that pay you a monthly benefit, either for life or for a stated term. Each source can be assigned to you or your spouse. Employer / government / union pensions live on the Pensions page.

For each annuity, enter the monthly benefit, the age the payments begin, and any cost-of-living adjustment built into the contract. If the annuity has no COLA, leave it at 0% - many fixed annuities don't escalate, and the loss of real purchasing power over a long retirement is a real consideration when comparing options.

There is no separate "kind" setting to choose. The two settings below describe the contract between them, and reports name the kind from what you pick: choose Planned future purchase and your plan reads as a SPIA, choose Period certain and it reads as a period-certain annuity. Leaving both at their defaults describes annuity income you already receive.

Purchase status

• Already purchased / owned (default): the planner models only the income. Do not also include the assets used to buy this annuity as normally invested portfolio assets, or your plan will double-count them.
• Planned future purchase: the planner models the premium leaving your money at the purchase age, then models the annuity payments. Income begins at the Start age above. The gap between purchase age and start age is what makes a DIA / deferred income annuity useful: buy at 60, income starts at 70.

Paid from - only asked for a planned purchase, and it changes the tax bill more than anything else on this page.

• Portfolio withdrawal (default): the premium is withdrawn using the same priority that funds any other one-time outflow (Taxable -> Tax-deferred -> Tax-free -> Cash, modified by each account's Draw Priority setting), and whatever that withdrawal produces is taxed like any other withdrawal. Right for an annuity bought with money you already hold outside a retirement account.
• Rollover from a tax-deferred account: the premium comes straight out of your tax-deferred balance, custodian to custodian. The IRS sees neither a distribution nor a purchase, so no income is recognized and no tax is charged in the purchase year. This is how most people actually buy a SPIA - roll a pension lump sum or an IRA to the insurer - and choosing the portfolio option for it invents a large one-year tax bill that never happens.

The payments themselves are taxed by the Tax treatment setting below, whichever way the premium was funded. For a rollover that should be Fully taxable: an exclusion ratio exists because you bought the annuity with money you had already paid tax on, and pre-tax retirement dollars have no such basis, so every dollar coming back out is ordinary income. The editor warns you if a rollover-funded annuity is set to anything else.

A rollover can only move money that is in your tax-deferred accounts in the purchase year. If the premium is more than those accounts are projected to hold, the plan moves what is there, takes nothing from your other accounts, and still counts the annuity's full income. That makes the results too optimistic, so a warning appears at the top of this page and in your plan's insights, naming the year, the premium and what the accounts could cover. Lower the premium and the income to match, move the purchase to a year the account can cover it, or enter the remainder as a separate purchase paid from the portfolio.

If a pension lump sum is what buys the annuity, do not also leave that lump sum in your plan as ordinary invested assets. Take the pension as a lump sum, set this annuity to a planned purchase, and enter the real premium. The Pensions and Income Annuities pages warn you when they see a lump sum alongside an annuity that nothing appears to have paid for, because that combination counts the same money twice and makes the annuity income free.

Payout type

• Lifetime (default): payments continue indefinitely. For self / spouse-owned records the engine still respects owner mortality.
• Period certain: payments stop after the End age you enter (inclusive - payments continue through that age, then stop). Beneficiary continuation past the term isn't modeled.

When the annuity starts - the Start age uses calendar-year-of-age semantics: payments begin on January 1 of the calendar year the owner reaches that age, and the engine credits a full 12 months of payments in that year regardless of which month the birthday falls in.

Tax treatment

• Fully taxable (default): every dollar of the payment hits ordinary income.
• Not taxable: cash flow only - never taxed (e.g., an HRA or certain disability annuities).
• Partially taxable: enter the taxable percentage of each payment (0-100). The planner taxes that share as ordinary income and treats the rest as non-taxable cash flow. Retirement Figures does not calculate the IRS exclusion ratio - look up your contract's number and enter it. The percentage you enter also applies for as long as the annuity pays. On a lifetime contract the real exclusion stops once you have recovered your investment, roughly at life expectancy, after which every dollar is taxable, so a long-lived plan understates tax in its last years.

Modeling decisions you're still comparing - if you haven't committed to buying yet, the Pension Optimizer can help you compare a monthly income stream to a lump-sum alternative on a break-even / required-return basis.

What this page doesn't model yet - cash refund / installment refund features, life-with-period-certain, joint survivor percentage on annuities, QLAC-specific rules, automatic exclusion ratio calculation, and live SPIA quotes. If any of those matter for your contract, email info@retirementfigures.com.