Annuity Calculator
Calculate the future value or present value of any annuity — find how much regular payments will grow or what a stream of payments is worth today.
Example Calculation
Tab 1: Payment $1,000/mo | Rate 5% | 20 years | Ordinary
- Future Value: $411,033.67
- Total Paid: $240,000
- Interest Earned: $171,033.67
- Growth: 1.71x
Tab 2: Payment $1,000/mo | Rate 5% | 20 years | Ordinary
- Present Value: $151,525.31
- Total Payments: $240,000
- Total Interest: $88,474.69
Frequently Asked Questions
What is an annuity?
An annuity is a series of equal payments made at regular intervals. In finance annuities are used for retirement income streams pension payments mortgage payments and savings calculations. The future value of an annuity tells you how much a series of regular deposits will grow to at a given interest rate. The present value tells you what a future stream of payments is worth in today's dollars.
What is the difference between an ordinary annuity and an annuity due?
An ordinary annuity (also called annuity-in-arrears) makes payments at the end of each period such as most loan payments and mortgage payments. An annuity due makes payments at the beginning of each period such as rent and insurance premiums. Because annuity due payments are made earlier they earn one extra period of interest making the future value slightly higher than an ordinary annuity at the same rate.
How is the present value of an annuity used in real estate?
The present value of an annuity is the basis for mortgage calculations. When you take out a mortgage the bank calculates the present value of all your future monthly payments at the loan's interest rate which should equal the loan amount borrowed. This is why lower interest rates allow you to borrow more for the same monthly payment — the present value of the payment stream is higher at lower discount rates.
What is a good rate of return to use for retirement planning?
For long-term retirement planning 5% to 7% annual return is commonly used as a conservative estimate for a balanced portfolio of stocks and bonds. For more aggressive stock-heavy portfolios 7% to 10% is sometimes used based on historical S&P 500 returns. Always use conservative estimates for planning purposes since actual returns vary year to year and sequence of returns risk can significantly impact retirement outcomes.
How does compounding frequency affect annuity calculations?
This calculator uses monthly compounding which is the most common frequency for savings and retirement accounts. More frequent compounding (daily versus monthly) results in slightly higher future values. The difference between daily and monthly compounding is usually less than 0.1% annually and is not significant for most planning purposes. What matters most is the consistent contribution amount and the annual interest rate.