📋 Financial Planning
Annuity Calculator
Calculate future value, payout income, or present value of any annuity. Supports ordinary annuity and annuity due, with annual and monthly contributions.
📈 Future Value
How much will regular payments grow to?
💸 Payout Income
How much income from a lump sum?
💰 Present Value
How much is needed to fund a payout?
Future Value Calculator
How much will your contributions grow to?
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FUTURE VALUE AT END OF TERM
$524,057
After 25 years of contributions
$10,000
Principal
$150,000
Total Contributions
$364,057
Interest Earned
7.0×
Growth Multiple
📈 Annuity Growth Over Time
📋 Year-by-Year Schedule
Understanding Annuities
An annuity is a series of equal periodic payments made or received over time. Our annuity calculator handles three key scenarios: accumulating future value from regular contributions, calculating income from a lump sum, and finding the present value needed to fund a desired income. Use it for retirement income planning, investment projections, and comparing savings strategies. See also our retirement calculator, compound interest calculator, and Social Security calculator.
📐 Annuity Formulas
FV = PV×(1+r)ⁿ + PMT×[(1+r)ⁿ-1]/r
PV = PMT × [1-(1+r)^-n] / r
PMT = PV × r / [1-(1+r)^-n]
Where r = periodic rate, n = number of periods, PMT = payment per period, PV = present value, FV = future value.
Annuity Due: multiply result by (1+r) — payments at beginning of each period earn one extra period of interest.
📊 Ordinary vs Annuity Due
- Ordinary Annuity: Payments at END of each period (most common)
- Annuity Due: Payments at BEGINNING of each period
- Annuity due always produces higher FV (one extra period of growth)
- Mortgage payments → ordinary annuity
- Rent payments → annuity due
- Most retirement account contributions → ordinary annuity
💸 Types of Annuity Products
- Fixed annuity: Guaranteed interest rate; predictable income
- Variable annuity: Returns tied to investment portfolio; higher potential/risk
- Indexed annuity: Returns linked to market index with floor protection
- Immediate annuity: Lump sum → income starts immediately
- Deferred annuity: Accumulation phase → income starts later
- Lifetime annuity: Guaranteed income for life regardless of longevity
⚠️ Annuity Pros and Cons
Advantages:
- Guaranteed income for life (longevity protection)
- Tax-deferred growth (non-qualified annuities)
- Predictable income stream for budgeting
Disadvantages:
- High fees (1–3%/year for variable annuities)
- Surrender charges for early withdrawal (6–8 years)
- No inheritance if you die early (life-only annuity)
- Inflation erodes fixed payments over time
Frequently Asked Questions
An annuity is a contract between you and an insurance company (for annuity products) or a series of equal periodic cash flows in financial mathematics. In the insurance context, you pay a lump sum or series of payments, and the insurer provides a guaranteed income stream — either for a set period or for life. In mathematical finance, an annuity is simply any stream of equal periodic payments, including mortgage payments, rent, or regular retirement savings contributions. Our calculator handles the mathematical version across accumulation and payout scenarios.
An ordinary annuity (also called annuity immediate) makes payments at the end of each period — most loans and retirement contributions work this way. An annuity due makes payments at the beginning of each period — rent is the classic example. Annuity due always produces a slightly higher future value because each payment earns one additional period of interest. The difference: FV (annuity due) = FV (ordinary) × (1 + r). For a 7% rate, annuity due FV is 7% higher than ordinary annuity FV.
Present value of an ordinary annuity: PV = PMT × [1 - (1+r)^-n] / r. For example, to receive $40,000/year for 25 years at 5% annual return, the required lump sum today is: PV = 40,000 × [1 - (1.05)^-25] / 0.05 = $563,757. This is the amount you'd need to invest today to fund that income stream. Use the Present Value tab above to calculate this instantly for any combination of payout, rate, and years.
Annuities can make sense for people who want guaranteed income they cannot outlive and have a pension or SS that doesn't cover all expenses. They're less appropriate if you have significant health issues (short life expectancy), need liquidity, or can self-manage investments at lower cost. The main drawbacks are fees (1–3%/year for variable annuities) and surrender charges. A simple immediate annuity from a low-cost insurer is often more transparent than complex variable products. Always compare the guaranteed income to the 4% withdrawal rule from a low-cost index fund portfolio before buying.
Annuity due (beginning of period) produces exactly (1+r) times the future value of an ordinary annuity. At 7% over 25 years, this means annuity due produces 7% more in final value. Practically: contributing at the start of January instead of end of December each year adds 7% more over time. This is why maxing out your 401(k) or IRA early in the year (rather than December) produces measurably better long-term results. Toggle the timing option in our Future Value calculator to see the exact difference.