Need Investment/Math Help Please (55, respect, accident, years)

[LookingatFL]

Hi Everyone,

Well, I am not great at understanding math due to an accident that I was in, and therefore, I am not great at understanding investments. I am ashamed and hanging my head. Can someone please explain the following to me in simple language:

I have just read a post about Immediate Annuities. In point of fact another very well respected poster on CD advised me to look into these. The post I read is here:
Why My Nest Egg Only Need Last to Age 70 | The Retirement Blog

According to this article if at age 70 I invested $1,000,000 into an Immediate Annuity I would receive 8.04% interest and a monthly payout of $6,701 for life. Since $6,701 is a monthly payout, I multiplied it by 12 to give me my annual payout. That figure is $80,412. Then I guessed at how long I might live. I guessed that I am going to live somewhere between 22 and 30 years after I reach age 70, which would have me dead between ages 92 and 100. I figured that was a good assumption.

I multiplied my annual figure $80,412 by years left to live. I did this for all ages from 92 through 100.

If I live to be 100 I would have received $2,412,360 ($80,412 x 30 years).

Then I went to a compound interest calculator. I put in $1,000,000 as the initial investment. I said that I would not add any further income. I chose .67 (8.04/12) as the interest rate. I chose 30 years as the years of growth. I chose compounding to be at the end of each period. I chose compounding to be 12 times per year. The answer was $1,222,556.19 Compound Interest Calculator

On the other hand, if I change the figures in the calculator to be 8.04% interest over 30 years growth compounded only once a year at the end of the period, the result is $10,175,066.72

What am I doing wrong mathematically? Shouldn't the numbers be similar?

Why is my annuity so much more money? when compared to the $1,222,556 answer? If I didn't do anything wrong mathematically, why is the annuity more money?

Thank you for your help. I am sorry to be so confused. Years of therapy did little to help the math situation.

[rational1]

The annuity company doesn't think you will live to 100.

[akck]

Your problem is that the calculator was expecting the annual interest rate that it would then divide by 12 to get the monthly rate. It divided .67 by 12, giving you a lower value. Put in 8.04 to get the correct answer. As to whether getting an annuity is a good idea, well, that's another topic.

[LookingatFL]

Thank you akck

[Darthfrodo]

I think the answer is 7........and stay away from annuities.

[Ellwood]

Avoid annuities.

[Heidi60]

Avoid annuities!