Calculate the fixed monthly payout you can withdraw from a lumpsum investment over a chosen number of years.
An Annuity Calculator estimates the future value of a series of regular, equal payments made into an investment that earns compound interest, or conversely, the present value of a stream of future payments you plan to receive. Annuities are common in retirement planning, insurance payout structures, and structured settlements, where someone contributes a fixed amount at regular intervals, monthly, quarterly, or yearly, and the account grows because each contribution starts earning its own interest from the moment it is deposited.
For an ordinary annuity (payments made at the end of each period), the future value is FV = PMT x [((1+r)^n - 1) / r], where PMT is the payment amount per period, r is the interest rate per period, and n is the total number of periods. For an annuity due (payments made at the start of each period), the result is multiplied by an additional factor of (1+r) since each payment earns one extra period of interest.
Enter the regular payment amount, the interest rate per period, the number of periods, and whether payments occur at the start or end of each period. The calculator then returns the total future value the annuity will accumulate to by the end of the term.
Example 1: Contributing 5,000 at the end of every month for 20 years (240 months) at a 9% annual rate (0.75% monthly) grows to roughly 33,10,000, of which only 12,00,000 was actually contributed, the rest is compound growth.
Example 2: The same 5,000 monthly contribution made as an annuity due (start of each month) grows slightly higher, to about 33,35,000, because each deposit gets one additional month of interest compared with the ordinary annuity case.
In an ordinary annuity, each payment is made at the end of the period, whereas in an annuity due it is made at the start; because money deposited earlier earns more interest, an annuity due always produces a slightly higher future value for identical payment amounts and rates.
The more frequently interest compounds relative to how often you contribute, the faster the balance grows, since interest earned in earlier periods itself starts earning interest sooner, which is why monthly compounding outperforms annual compounding for the same nominal rate.
This version focuses on the pure annuity (regular equal payments only); if you also have an initial lump sum, its future value can be calculated separately using compound interest and then added to the annuity result.
A deferred annuity delays the start of payouts to a future date, allowing the invested amount to grow tax-deferred during the accumulation phase before payments begin, which differs from an immediate annuity that starts paying out right away.
Present value tells you how much a lump sum today would need to be worth in order to fund a specified stream of equal future payments, which is exactly the calculation used to price structured settlements and pension buyouts.
Yes, a fixed nominal payment loses purchasing power over a long annuity term, so many retirement plans either choose an inflation-adjusted annuity or plan withdrawals that increase with a set annual escalation to keep pace with rising prices.
Because interest compounds on itself, even a one or two percentage point change in the assumed rate can alter the final balance by a large percentage over decades, which is why annuity projections are usually shown across a range of rate assumptions.
No, a fixed deposit involves a single lump-sum deposit earning interest, while an annuity involves a series of regular contributions (or regular payouts), so the underlying formulas and the shape of the growth curve are different even though both rely on compound interest.
A perpetuity is a special case of an annuity where the regular payments continue indefinitely rather than for a fixed number of periods; its present value simplifies to payment divided by the interest rate per period, since there is no final period to discount back from.
Depending on local rules, the growth portion of an annuity payout may be taxed as income when withdrawn, while the portion representing your own original contributions is often not taxed again, so it's worth checking the specific tax treatment that applies to your annuity product before relying on the gross figures shown here.