An annuity is a series of equal payments made at regular intervals. Many retirees purchase annuities or convert savings into them to guarantee a steady income stream. The payment amount depends on the starting balance (present value), the interest rate earned, and the number of payments. By solving for the periodic payment, you can plan your budget with confidence.
The payment calculation uses the time value of money. For an ordinary annuity paid at the end of each period, the formula is , where is the interest rate per period and is the number of payments. This formula ensures the present value of all payments equals the initial investment.
Enter the amount invested (present value), the interest rate per period, and the total number of payments. Click Calculate to find the fixed payment required to fully amortize the annuity. The tool assumes payments occur at the end of each period, which is common for many retirement products.
Understanding annuity payments helps you compare options such as immediate annuities, which start payouts right away, versus deferred annuities that accumulate interest before distributing funds. Factors like inflation, tax treatment, and payout guarantees all influence which product is best for your needs. Use this calculator for quick estimates, then consult a financial professional for personalized advice.
Sometimes you may know how much income you want and need to determine the lump sum required. Rearranging the formula above yields the present value. This insight can guide savings goals if you plan to convert a nest egg into an income annuity later on.
This tool assumes a fixed interest rate and does not account for fees, taxes, or variable returns. Real-world annuity contracts often include riders, surrender charges, or cost-of-living adjustments that change the payout. Treat the results as a starting point for conversation rather than a final quote.
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