MACH96
Internal Rate of Return
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MACH96 · Wealth Planning Series
MACH96
Wealth Planning Series · Vol. II

Internal Rate of Return

Annuity Income Valued Against Longevity
Prepared by MACH96
Understanding the Metric

The internal rate of return is the single annual rate that makes an income annuity's future payments worth exactly the premium paid for them today — the true yield of the income stream. Unlike a bond's fixed yield, an income annuity's IRR builds with longevity: the longer income is received, the higher the realized return. This report measures that return across three life-expectancy benchmarks — a median lifetime, an extended one, and the long-lived tail.

I · Client & Contract Inputs
Establish the Parameters
Enter the annuitant's age, the proposed contract, and the income design. The IRR is then evaluated at three longevity benchmarks — because the return an income annuity delivers is governed by how long the income is received.
A
Primary Client
B
Joint Annuitant
C
The Annuity Contract
Value the payout % is applied to. Defaults to premium if equal.
Annual income = payout × income base at start.
Equal to current age = immediate income.
Set to Yes to model base roll-up during deferral and an annual step-up to income.
Annual growth of the base before income begins. Use 0 if the base above is already the value at the start age.
Annual step-up applied to each year's income.
D
Advisor & Report
Contract Parameters
How the Return Grows with Longevity
Income, Cumulative Income & IRR
Highlighted rows mark the three longevity benchmarks and the break-even year.
Sources & Methodology
Life expectancy and survival probabilities derive from the Social Security Administration Period Life Table (2022 mortality experience, as published in the 2025 OASDI Trustees Report). The internal rate of return is computed by solving for the discount rate that sets the net present value of the income stream, net of the initial premium, to zero, with income credited in arrears (at year-end) following the standard convention. No death benefit is assumed, so the IRR is negative until cumulative income recovers the premium. Returns are evaluated at the 50th-, 25th-, and 5th-percentile survival horizons drawn from that table. Joint-and-survivor contracts assume income continues to the last surviving annuitant, the standard actuarial convention.
Disclosure
This tool produces illustrative estimates based on published actuarial data and the contract assumptions entered. It is not a guarantee of future results and does not reflect contract fees, rider charges, surrender periods, or taxation. IRR is one of several measures used to evaluate an income annuity and does not capture liquidity, guarantees, or other product features. For implementation, consult a MACH96 advisor.