Estimate the guaranteed monthly income an annuity premium can buy.
Monthly income
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Annual income
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Payback period
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Your breakdown
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What an annuity actually buys you
An annuity is a trade. You hand an insurer a lump sum today, and in return it pays you a fixed monthly income, in most plans for the rest of your life. The appeal is certainty. Unlike a self-managed portfolio that can run dry if markets fall or you live longer than planned, a life annuity keeps paying whether you reach 80 or 100. The HKMC Annuity Plan, run by a government-owned corporation, is the best known local example, but private insurers sell their own. This tool turns a premium and a quoted payout factor into a monthly figure, an annual figure, and the years it takes for the payments to return your original capital.
Reading the payout factor
Annuity income is usually quoted as a monthly amount per $1 million of premium. That single number bundles your age, your sex and the insurer's pricing into one figure, so it is the input that drives everything. A 65-year-old man under the HKMC plan sits around $5,500 per million a month, the illustrative factor this calculator starts with, though every provider and every birthday produces a different quote. Older starters get a higher factor because the expected payment period is shorter, and men typically receive slightly more than women for the same premium for the same reason. Always copy the factor straight from your own illustration rather than trusting a rule of thumb.
A $1 million premium, worked through
Put in a $1 million premium at a factor of $5,500 per million per month. The monthly income is simply the premium in millions multiplied by the factor, the annual income is twelve times that, and the payback period is the premium divided by the annual income:
So your capital is notionally returned in just over 15 years, around age 80 for a 65-year-old starter. Live longer and every payment after that is pure upside the insurer carries the cost of. Live shorter and you may get back less than you put in, which is the risk you are paying the insurer to absorb. The chart shows the cumulative income climbing year by year until it crosses the premium line.
The tax angle is refreshingly simple
For an individual, annuity income from a plan like this is generally not taxed in Hong Kong. There is no tax on investment income of this kind, no capital gains tax, and no separate annuity levy. A different product, the qualifying deferred annuity policy, is built specifically to earn a salaries tax deduction on the premiums you pay in, but that is a separate tool. The plain immediate annuity modelled here is about income security rather than a tax break. As always, confirm the treatment of your specific policy with the Inland Revenue Department, since product features differ.
When an annuity beats keeping the cash invested
The honest comparison is against managing the lump sum yourself. A self-managed portfolio can pay more in good years and leaves a legacy, but it can also run dry if you live long or markets turn early in retirement. An annuity trades that upside and flexibility for a payment that never stops. The crossover is longevity: the longer you live past the payback point, here just over 15 years, the better the annuity looks against a portfolio you might outlive. Many retirees split the difference, annuitising enough to cover essential bills and investing the rest for growth and access.
What happens to my money if I die early?
Most life annuities include a death benefit or a guaranteed period, so your beneficiaries receive the balance of guaranteed payments or a lump sum if you die before the capital is returned. The exact protection depends on the plan you pick. This calculator shows the income and payback, not the death benefit, so read the policy schedule for that figure.
Does the monthly income rise with inflation?
Usually no. A standard annuity pays a level amount for life, so $5,500 a month buys less in twenty years than it does today. Some plans offer an escalating option that grows the payment each year, but it starts lower in exchange. If you want inflation protection, ask the insurer for an escalating illustration and compare the starting factors.