Contributing to a variable annuity creates long term tax deferred growth. The variable annuity calculator is therefore employed to see how a variable annuity might fit into your retirement plan.

Before you understand the workings of the variable annuity calculator, there are certain terms you must get accustomed to.

In the first instance, you must understand that a variable annuity is an insurance product meant to provide long-term, tax deferred investments. You are not granted any tax deduction but you pay the tax at the time of withdrawal. A variable annuity could be a good option if you wish to increase your tax deferred savings. The calculator supposes that you make your contribution at the beginning of each year. The calculator is also not meant for to describe a specific insurance product and hence should not be used as a general illustration of the tax deferred feature of a variable annuity.

Another term to bear in mind in the calculation of a variable annuity is the surrender charges. The surrender charges are a percent of the annuity balance you will be charged if you withdraw your annuity balance early. The actual surrender charges vary widely from annuity to annuity. Make sure to check with your investment advisor if you are unsure of the surrender charges that may apply to your particular annuity. You must also be aware of your current age.

You will also note the withdrawal age. This is the age you wish to start taking money out of the annuity. The calculator assumes that the year you begin withdrawals, you do not make any contributions to your annuity. If you begin at the age of 65 for instance, your last contribution would have happened when you were actually 64.

The next is the annual contribution, which is the amount you will contribute to your variable annuity each year.

You will also note the expected return, which is the annual rate of return you expect for your variable annuity. The calculator presumes that your return is compounded annually and your contributions are made at the beginning of each year. The actual rate of return is grossly dependent on the type of investment you choose.

There is the current tax rate, which is your current marginal tax rate you expect to pay on your taxable investments. The retirement tax rate is the marginal tax rate you expect to pay on your investments at retirement. You will also note the years until retirement that is the number of years before retirement. The annuity total before taxes is the total value of your variable annuity at retirement before taxes and the annuity total after taxes is the total value of your variable annuity at retirement after taxes are paid. And lastly is the total taxable account that is the total value of your savings, at retirement, if your annual contribution is deposited into a taxable account

Once you have noted the value of all the above, all you need to do is to simply fill it in the calculator and click the calculate button and you will have your result. There are so many of the calculators online, which are for free use. You can also seek the advice of a professional to guide you.