Annuity Calculator

What Is the Annuity Calculator?

An annuity is a series of equal payments made at regular intervals -- this could be payments you receive (like structured settlement or pension payments) or payments you make (like regular contributions). This calculator computes both the future value (what a payment stream grows to) and present value (what a stream of future payments is worth today), a genuinely different formula pair from a single lump-sum calculation.

How to Use This Calculator

Enter your annual payment amount, the annual interest/discount rate, and the number of years the payment stream runs.

The Formulas

Worked Example

Practical Uses

Use future value to project what a regular payment stream (like consistent annual investment contributions) grows to. Use present value to evaluate what a promised future payment stream (like a pension annuity payout option, or a structured settlement) is really worth in today's dollars.

Ordinary Annuity Timing

The formulas on this page describe an ordinary annuity, where each payment happens at the end of a period. That detail affects results. If payments actually occur at the start of each year, an annuity due, each payment earns one extra period of interest, and both values are higher than shown. A rough adjustment is to multiply the result by one plus the rate. For example, at a 5% rate, an annuity due is about 5% larger than the ordinary annuity. Checking which timing your contract uses avoids a mismatch.

Reading the Two Numbers Together

Future value and present value describe the same stream at two points in time. Present value is what the stream is worth today, discounted at the rate you enter. Future value is what it would grow to at the end. In the worked example, $62,311.15 invested today at 5% for 20 years grows to about $165,329.77, which is the same figure as the future value of the payments. That equivalence is a good sanity check: present value times (1 plus r) to the power n should equal future value.

Choosing the Rate

The rate is the most influential input and the easiest to choose badly. Use these guidelines:

• For projecting savings, use a realistic expected return, and try more than one.
• For valuing promised payments, use a rate that reflects the risk and your alternative uses of the money. A safer promise deserves a lower discount rate, and a riskier one a higher rate.
• Higher discount rates shrink present value. A payment stream that looks generous at a 3% rate can look ordinary at 7%.

Example of a Comparison

Suppose, hypothetically, you are offered $12,000 a year for 15 years or a lump sum today. Enter 12,000, your chosen rate, and 15 years to get the present value, then compare it with the lump sum. Run it at two different rates. If the lump sum beats the present value at a conservative rate, it deserves a serious look. If it falls short even at a high rate, the payments may be worth more. Remember that inflation, taxes, and whether the payer can be counted on all sit outside this arithmetic.

Limits

• Payments are equal and annual. Monthly or growing payments need different formulas.
• Commercial annuities from insurers involve fees, mortality assumptions, and product terms that are not modeled here.
• The result is a mathematical value, not a purchase recommendation.

For insurance annuities or settlements, consider getting advice from a fiduciary adviser or attorney before signing.

Frequently Asked Questions