What is a life annuity?

Although the agreements can vary considerably, a lifetime annuity involves the sale of a property, usually a house or apartment, with the purchase price being paid in full or in part through periodic payments (annuities). With a temporary lifetime annuity, a fixed term is agreed upon, while with a traditional lifetime annuity, the annuity payments continue until the end of the recipient's life and are therefore tied to the recipient's life expectancy. In this way, real estate can be transferred to children during the owner's lifetime. A life annuity often includes a usufruct right, allowing the seller to continue using the property. More information on life annuities...

Not to be confused with a life annuity is another form of real estate monetization, the reverse mortgage, which is common in the USA. A reverse mortgage works by paying out an annuity, which is repaid in a single lump sum at the end of the term. Depending on the agreement, the accrued annuity plus interest is due after a certain period, upon moving into a nursing home, or upon the borrower's death. The borrowers remain the owners of the property and retain full control over it. Repayment can be made by the borrower, their heirs, or by selling the property. Any surplus proceeds from the sale of the house naturally go to the heirs.

The reverse mortgage is based on the principle of an annuity that pays out an annuity, which is a type of reverse mortgage. In Europe, life annuities are particularly common in the private sector. A typical example is the sale of a house. With a life annuity agreement, the purchase price is not paid in full, but only partially (or not at all). The buyer then commits to paying the seller a portion of the purchase price immediately and the remainder as a monthly annuity until the seller's death.

How much is the life annuity, for example, for a property or a capital sum? Given a certain age and interest rate, how much capital (the property's value) would need to be to receive a specific life annuity? Or, what life annuity can be expected for a particular property value?

Annuity for one life
Annuity for joint lives

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Instructions

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  • Enter gender, age, the interest rate at which the present value is to be compounded, the payment method, and the present value or desired annuity.

  • Click 'Calculate'.

  • If you have entered the present value, the expected annuity will be calculated; if you have entered the annuity amount, the necessary present value will be calculated.
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Age

Present Value

Interest rate:
Payment Method

Annuity
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Instructions

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Enter

  • Whether the annuity should be paid in advance or in arrears
  • Whether the annuity payments should only begin after a certain period or
  • whether the annuity payments should end after a certain period.
Payable:
Deferred Annuity:
Defense by
Years
Temporary annuity:
Payable for
Years
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Life annuity calculator:


Present value:The present value is the amount to be used for the life annuity, e.g., the proceeds from the sale of a property or accumulated savings. The present value can either be calculated if the life annuity amount is known or entered into the corresponding field.

Present value: Interest Rate:Enter the agreed interest rate in the corresponding field.

Payment Method:Select the payment method for the annuity.

Annuity:If you have entered the present value, the annuity will be calculated. If you would like to receive a specific annuity amount, enter it. The present value required to generate this annuity will be calculated.

Advanced Options:(Usually not used)

Payable:Select whether the annuity is payable in advance, i.e., For example, it should be paid out at the beginning or end of a year.

Deferred Annuity: Specify whether the payment of the annuity should be deferred for a specific period – the present value will accrue interest in the meantime.

Temporary Annuity: Specify whether the annuity should only be paid for a specific period.

Calculate:Click on 'calculate' to calculate the annuity.

Delete Information:Deletes all information.

Note:

These calculations are based on the 2008/2010 German mortality table from the Federal Statistical Office Wiesbaden or the 2000/2002 mortality table from Statistics Austria. Mortality tables reflect the average life expectancy of a country's population and vary from country to country.

Insurers use their own mortality tables, some of which assume significantly higher life expectancies. The results vary depending on the mortality tables used.

No liability is assumed for the accuracy of these calculations!