💰 Annuity Calculator: Present Value and Future Value of Payments
By ToolNimba Finance Team · Reviewed by ToolNimba Editorial Review, personal finance content · Updated 2026-06-23
This calculator gives an estimate only and is not financial advice. It assumes a constant payment, a constant rate per period and that the rate compounds once per period. Real annuity products, pensions and insurance contracts add fees, taxes, mortality assumptions, surrender charges and rider costs that change the outcome. The amount a real income annuity pays also depends on your age, gender, the payout option and current insurer rates, none of which a time-value formula captures. Confirm any figure with the product provider and speak to a qualified adviser before making a decision.
An annuity is a series of equal payments made at regular intervals, such as a monthly pension, a savings deposit, or a loan repayment. This calculator works out two things for you: the present value (what that whole stream of future payments is worth in today money) and the future value (what it grows to by the end). Enter the payment, the interest rate per period and the number of periods, then choose whether payments fall at the end of each period (an ordinary annuity) or the start (an annuity due).
What is the Annuity Calculator?
An annuity is any sequence of equal cash flows spaced evenly in time. The two questions people ask about an annuity are mirror images of each other. Present value asks: if I am promised this stream of payments, what single lump sum today is equal to it, given that money can earn interest? Future value asks: if I make these payments and they earn interest, how much will I have accumulated at the end? Both depend on the rate per period (r) and the number of periods (n). This tool answers both at once and also shows the total you pay in and the interest portion, so you can see the time value of money at work.
For an ordinary annuity, where each payment lands at the end of its period, present value is PV = PMT x (1 - (1+r)^-n) / r and future value is FV = PMT x ((1+r)^n - 1) / r. The PV formula discounts each future payment back to today, and the FV formula compounds each payment forward to the final date. The two are linked: FV = PV x (1+r)^n, because growing the present value forward over n periods must land on the future value. When the rate is zero, both collapse to PMT x n, because nothing is being discounted or compounded.
An annuity due is the same stream shifted so every payment happens at the start of its period instead of the end. Each payment therefore earns interest (or is discounted) for one extra period, so both the present value and the future value are simply the ordinary-annuity result multiplied by (1+r). Rents, leases and insurance premiums are usually annuities due, since you pay at the beginning. Pensions, bond coupons and most loan repayments are ordinary annuities, paid at the end. Getting the timing right matters: at a 5% rate the difference is exactly 5% on the whole figure.
Financial annuities sold by insurers come in several flavours, and the same time-value math sits underneath all of them. An immediate annuity (a single premium immediate annuity, or SPIA) converts a lump sum into income that starts within about a year. A deferred annuity has an accumulation phase where your money grows tax deferred, followed by a payout phase that can begin years or decades later. Fixed annuities credit a set rate, fixed indexed annuities tie growth to a market index with a floor, and variable annuities invest in subaccounts whose value can rise or fall. Whichever type you hold, the present value of the future payments is what the insurer is really pricing.
When an annuity moves into its payout phase you choose a payout option, and that choice changes the monthly figure far more than small rate differences do. Life only pays the most but stops at death with nothing left for heirs. Period certain pays for a fixed number of years to you or your beneficiary. Life with period certain blends the two. A joint and survivor option covers two lives and keeps paying a chosen percentage (50%, 75% or 100%) to the surviving spouse. Adding guarantees or a second life lowers the payment because the insurer expects to pay out for longer.
Two practical costs separate a textbook annuity from a real contract: surrender charges and tax. Deferred annuities often carry a surrender period of five to ten years during which cashing out triggers a declining penalty, frequently starting near 7% and stepping down each year. On the tax side, growth is tax deferred while the money stays in the contract, but withdrawals are taxed as ordinary income, earnings come out first for non-qualified annuities, and taking money before age 59 and a half can add a 10% IRS penalty. None of these appear in the present-value formula, so always net them out before comparing an annuity against other options.
When to use it
- Working out the lump sum a pension or settlement offer is worth today before you accept it.
- Estimating how much a regular savings or retirement contribution will grow to over time.
- Comparing a stream of future payments against a one-time cash offer on the same terms.
- Pricing a lease, rent or insurance premium that is paid at the start of each period as an annuity due.
- Sizing the accumulation balance a deferred annuity needs to reach before its payout phase begins.
- Checking whether a quoted monthly income from an immediate annuity looks reasonable for the premium and rate.
How to use the Annuity Calculator
- Enter the payment made each period (for example each month or each year).
- Enter the interest rate per period as a percent (annual rate divided by the number of periods per year).
- Enter the total number of periods.
- Choose ordinary annuity (payment at period end) or annuity due (payment at period start).
- Read off the present value, the future value, the total paid in and the interest.
Formula & method
Worked examples
A $1,000 payment every period for 10 periods at 5% per period, ordinary annuity.
- r = 5 / 100 = 0.05, n = 10, PMT = 1000
- (1 + r)^n = 1.05^10 = 1.628895
- (1 + r)^-n = 1 / 1.628895 = 0.613913
- PV = 1000 x (1 - 0.613913) / 0.05 = 1000 x 0.386087 / 0.05 = 7,721.73
- FV = 1000 x (1.628895 - 1) / 0.05 = 1000 x 0.628895 / 0.05 = 12,577.89
Result: PV ≈ $7,721.73, FV ≈ $12,577.89 (total paid in $10,000)
A $500 payment every period for 24 periods at 1% per period, annuity due.
- r = 1 / 100 = 0.01, n = 24, PMT = 500
- (1 + r)^n = 1.01^24 = 1.269735, (1 + r)^-n = 0.787566
- Ordinary PV = 500 x (1 - 0.787566) / 0.01 = 10,621.69
- Ordinary FV = 500 x (1.269735 - 1) / 0.01 = 13,486.73
- Annuity due multiplies each by (1 + r) = 1.01
- PV due = 10,621.69 x 1.01 = 10,727.91, FV due = 13,486.73 x 1.01 = 13,621.60
Result: PV ≈ $10,727.91, FV ≈ $13,621.60 (total paid in $12,000)
How much monthly retirement saving is worth after 30 years: $500 a month, 6% annual return, ordinary annuity.
- Convert to monthly: r = 6% / 12 = 0.5% = 0.005, n = 30 x 12 = 360, PMT = 500
- (1 + r)^n = 1.005^360 = 6.022575
- FV = 500 x (6.022575 - 1) / 0.005 = 500 x 5.022575 / 0.005
- FV = 500 x 1004.515 = 502,257.52
- Total paid in = 500 x 360 = 180,000, so interest earned = 322,257.52
Result: FV ≈ $502,257.52 from $180,000 of contributions, with about $322,258 of growth
Present and future value of a $1,000 ordinary annuity at 5% per period
| Periods (n) | Present value | Future value | Total paid in |
|---|---|---|---|
| 5 | $4,329.48 | $5,525.63 | $5,000 |
| 10 | $7,721.73 | $12,577.89 | $10,000 |
| 15 | $10,379.66 | $21,578.56 | $15,000 |
| 20 | $12,462.21 | $33,065.95 | $20,000 |
| 30 | $15,372.45 | $66,438.85 | $30,000 |
Annuity types at a glance
| Type | When income starts | Growth | Best suited for |
|---|---|---|---|
| Immediate (SPIA) | Within about a year of the lump sum | None, you buy income directly | Retirees wanting income now |
| Deferred | After an accumulation phase, years later | Tax deferred during accumulation | Savers building future income |
| Fixed | Immediate or deferred | Set guaranteed rate, like a CD | People wanting predictability |
| Fixed indexed | Usually deferred | Tied to an index with a floor | A balance of growth and safety |
| Variable | Usually deferred | Subaccounts that can rise or fall | Those accepting market risk |
Common payout options and the trade-off they make
| Payout option | How long it pays | Relative monthly amount | Leaves money to heirs |
|---|---|---|---|
| Life only | For one life, stops at death | Highest | No |
| Period certain | A fixed term, for example 10 or 20 years | Depends on term length | Yes, for the remaining term |
| Life with period certain | For life, guaranteed minimum term | Slightly lower than life only | Yes, within the certain period |
| Joint and survivor | For two lives | Lowest, covers a second life | Continues to the survivor |
Common mistakes to avoid
- Using an annual rate with monthly payments. The rate must match the payment period. If payments are monthly, use the monthly rate (annual rate divided by 12), and set n to the number of months. Mixing an annual rate with a monthly count overstates the result badly.
- Confusing ordinary annuity with annuity due. An ordinary annuity pays at the end of each period, an annuity due pays at the start. The due version is worth (1 + r) times more because each payment sits and earns for one extra period. Pick the wrong type and every figure is off by the rate.
- Mixing up present value and future value. Present value is what the stream is worth today, future value is what it grows to at the end. They differ by a factor of (1 + r)^n. Comparing a lump sum offered today against a future value is an apples-to-oranges error.
- Forgetting fees, taxes and inflation. A textbook annuity ignores product fees, income tax on the payments and the fact that inflation erodes the buying power of fixed payments over time. A nominal future value can look large while its real value is much smaller.
- Ignoring surrender charges on deferred annuities. Cashing out a deferred annuity during its surrender period, often the first five to ten years, can cost a declining penalty that starts near 7%. The present-value formula assumes you hold to term, so net out any surrender charge before comparing options.
- Treating an income annuity quote as pure time value. A real immediate annuity payment also reflects your age, gender, the payout option and the insurer mortality assumptions, not just the rate and term. Do not expect a textbook PV calculation to match an insurer quote exactly.
Glossary
- Annuity
- A series of equal payments made at regular, evenly spaced intervals.
- Present value (PV)
- The single lump sum today that is equivalent to a future stream of payments, given an interest rate.
- Future value (FV)
- The total amount the payment stream grows to by the end, after earning interest each period.
- Ordinary annuity
- An annuity whose payments occur at the end of each period, such as a bond coupon or loan repayment.
- Annuity due
- An annuity whose payments occur at the start of each period, such as rent or an insurance premium. Worth (1 + r) times an ordinary annuity.
- Rate per period (r)
- The interest rate for one payment interval, equal to the annual rate divided by the number of periods per year.
- Accumulation phase
- The period of a deferred annuity when money grows, often tax deferred, before any income payments begin.
- Payout phase
- The distribution phase when the insurer pays income to the annuitant, ending the accumulation period.
- Surrender charge
- A declining penalty the insurer applies if you withdraw from a deferred annuity during its surrender period, often the first five to ten years.
- Immediate annuity (SPIA)
- A single premium immediate annuity that turns a lump sum into income starting within about a year.
Frequently asked questions
What is the difference between present value and future value of an annuity?
Present value is what the whole stream of payments is worth in today money, found by discounting each payment back to now. Future value is what those payments grow to by the end, found by compounding each one forward. They are linked by FV = PV x (1 + r)^n, so the future value is always the larger figure when the rate is positive.
How do I calculate the present value of an annuity?
Use PV = PMT x (1 - (1 + r)^-n) / r, where PMT is the payment per period, r is the rate per period and n is the number of periods. This calculator applies the formula for you as soon as you enter the three inputs, and it adjusts automatically if you choose annuity due.
What is an ordinary annuity versus an annuity due?
An ordinary annuity pays at the end of each period (loans, bond coupons, most pensions). An annuity due pays at the start of each period (rent, leases, many insurance premiums). Because every payment in an annuity due earns interest for one extra period, its present and future values are both (1 + r) times those of an ordinary annuity.
What rate should I enter?
Enter the rate for one payment period, not the annual rate, unless the payments are annual. If you receive monthly payments and the annual rate is 6%, use 0.5% per period (6 divided by 12) and set the number of periods to the number of months.
Does this calculator handle a zero interest rate?
Yes. When the rate is 0, there is no discounting or compounding, so both the present value and the future value simply equal the payment multiplied by the number of periods. The calculator handles this special case so you never get a divide-by-zero error.
Is an annuity calculation the same as a loan payment?
They use the same present-value-of-an-annuity relationship. A loan is an annuity where the loan amount is the present value and the formula is rearranged to solve for the payment instead. So this tool and a loan EMI calculator share the same underlying math, viewed from different angles.
What is the difference between an immediate and a deferred annuity?
An immediate annuity, often a single premium immediate annuity (SPIA), converts a lump sum into income that begins within about a year. A deferred annuity first grows your money during an accumulation phase, then begins payments years or decades later. Deferring longer usually raises the eventual payout because the balance keeps growing and the insurer expects fewer payment years.
How much income would a $100,000 immediate annuity pay?
As a rough guide, a $100,000 immediate annuity for a 65-year-old might pay in the region of $600 to $700 a month for life, but the exact figure depends on your age, gender, the payout option you pick and current insurer rates. Use this tool to sanity-check a quote by entering the payment, rate per period and number of periods, then compare against the premium.
How are annuity payments taxed?
Growth inside an annuity is tax deferred while the money stays in the contract. When you take income it is taxed as ordinary income, and for non-qualified annuities earnings are treated as coming out first, so early withdrawals are largely taxable. Taking money before age 59 and a half can add a 10% IRS penalty on top. This calculator shows pre-tax figures, so net out tax before comparing options.
What payout option pays the most each month?
A life-only option pays the highest monthly income because it covers a single life and leaves nothing to heirs. Adding a period-certain guarantee, a life-with-period-certain term, or a joint and survivor benefit for a second life all lower the monthly amount because the insurer expects to pay out for longer.
Sources
- Present Value of an Annuity: Meaning, Formula, and Example , Investopedia
- Future Value of an Annuity: What Is It, Formula, and Calculation , Investopedia
- Annuity Calculator , Calculator.net