What is Future Value of Annuity Calculator?
Let’s break down the concept of annuity to understand the future value of annuity calculator better.
What is an Annuity?
An annuity is a financial instrument that helps people create a regular source of income. This is mostly targeted toward people looking to retire and receive regular monthly income.
For annuities to give out regular income, they need to be set up or ‘funded’ first. Annuities can be funded by either making a lump-sum payment or by paying monthly premiums.
What does the Future Value of an Annuity mean?
While funding the annuity with monthly premiums, investors (annuitants) also get some interest on their premiums.
Let’s say the annuity funding is done via monthly payments for 10 years. The Future Value of Annuity Calculator computes the future value of all the monthly premiums paid during the 10 years as well as the interest earned on the monthly premiums during the 10 years of funding the annuity.
How To Use The Future Value of Annuity Calculator?
Using the Annuity Future Value Calculator is simple. Just follow the steps below:
Simply open the Future Value of Annuity Calculator online. The online calculator should appear something like this with the option for inputting values in various fields.
Fill in the value for the investment period, i.e. for how many years (+months) you will be paying monthly premiums for funding the annuity.
Let’s say, the funding period is 10 years.
Determine how much you will be paying as monthly premiums, and how much interest you will be getting on all your monthly premium payments during the funding phase.
Let’s say the monthly premium is $2,000 and the interest rate is 5% per year [note that even though the payment is monthly, you have to input the interest rate on a per-year basis in this future value of annuity calculator].
Once all the inputs are fed to the calculator, click on the ‘Calculate Future Value of Annuity’ button to view the results.
In our example, the future value of the annuity comes out to be $310,565.
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