Annuity Payment Calculator Free Tool
Annuity Calculator
Investment Parameters
Results Summary
End Balance
$167,624.90
Starting Principal
$20,000.00
Total Additions
$100,000.00
Total Return/Interest Earned
$47,624.90
Balance Composition
Starting Principal
11.9%
$20,000
Additions
59.7%
$100,000
Return/Interest
28.4%
$47,625
Accumulation Schedule
Balance Growth Over Time
Annual Schedule
| Year | Addition | Return | Balance |
|---|---|---|---|
| 1 | $10,000.00 | $1,200.00 | $31,200.00 |
| 2 | $10,000.00 | $1,872.00 | $43,072.00 |
| 3 | $10,000.00 | $2,584.32 | $55,656.32 |
| 4 | $10,000.00 | $3,339.38 | $68,995.70 |
| 5 | $10,000.00 | $4,139.74 | $83,135.44 |
| 6 | $10,000.00 | $4,988.13 | $98,123.57 |
| 7 | $10,000.00 | $5,887.41 | $114,010.98 |
| 8 | $10,000.00 | $6,840.66 | $130,851.64 |
| 9 | $10,000.00 | $7,851.10 | $148,702.74 |
| 10 | $10,000.00 | $8,922.16 | $167,624.90 |
An annuity is a series of equal payments made at regular intervals. This calculator solves for payment amount, future value, present value, or number of periods for ordinary annuities (payments at period end) and annuities due (payments at period start). Annuity math underlies mortgages, lease payments, retirement income, and many investment products.
Types of Annuities
Ordinary annuities (most common) make payments at the end of each period. Annuities due make payments at the beginning. Ordinary annuities are used for most loans and bonds. Annuities due are used for leases and insurance premiums. Annuities due have slightly higher present values because each payment occurs one period sooner.
Ordinary Annuity FV = PMT × [(1+r)^n - 1] / r Ordinary Annuity PV = PMT × [1 - (1+r)^-n] / r Annuity Due: multiply by (1+r) to adjust for one-period-earlier payments
PMT = payment per period, r = rate per period, n = number of periods.
Annuity vs Lump Sum
Lottery winners and pension recipients often face the choice between taking a lump sum or an annuity payout. The financially optimal choice depends on the discount rate (what return you could earn on the lump sum), your life expectancy, tax treatment, and personal financial discipline.
| Factor | Favors Lump Sum | Favors Annuity |
|---|---|---|
| Expected return | High investment return | Low/uncertain returns |
| Life expectancy | Shorter-than-average | Longer-than-average |
| Discipline | Strong saver | At risk of overspending |
| Tax | Lower effective rate on lump sum | Spreads income over years |
Frequently Asked Questions
What is the difference between an annuity and an annuity due?⌄
An ordinary annuity makes payments at the end of each period (month, year). An annuity due makes payments at the start. Because payments in an annuity due occur one period earlier, they have more time to compound, making annuity due payments worth slightly more than equivalent ordinary annuity payments.
What is a perpetuity?⌄
A perpetuity is an annuity that pays forever (infinite number of periods). Its present value is simply PMT / r. Example: a perpetuity paying $1,000 per year at a 5% discount rate has a present value of $1,000 / 0.05 = $20,000. Perpetuities model preferred stock dividends and endowment funds.
How are annuity payments taxed?⌄
For qualified annuities (purchased with pre-tax money), all withdrawals are taxed as ordinary income. For non-qualified annuities, only the earnings portion is taxed (the principal was already taxed). Early withdrawals before age 59½ also incur a 10% penalty. Consult a tax advisor for guidance on your specific annuity.
What is an annuity in the insurance context?⌄
Insurance annuities are contracts that provide guaranteed income, often used in retirement planning. They come in fixed (guaranteed rate), variable (investment-linked returns), and indexed (tied to market index with a floor) varieties. Unlike financial annuities used in textbook calculations, insurance annuities often include fees and surrender charges that affect their actual value.