Annuity Calculator

What an annuity means in everyday money

In everyday money, an annuity is a series of equal payments made on a schedule. Rent, a car payment, a payroll deduction into a 401(k) and an automatic transfer to savings are all annuities in this sense. The payment amount stays the same and the gap between payments stays the same.

That makes the arithmetic predictable. If you know the payment, the rate and the number of payments, you can work out what the series will be worth at the end, or what it is worth today. The calculator above does both, and the only inputs it needs are the deposit, the annual rate and the term.

Insurance companies also sell a product called an annuity, which is a contract that turns a lump sum or a series of payments into income later. The SEC's investor education site explains how those contracts work, including fees and surrender charges. The math on this page is the same for any level payment series, whether the money goes into a savings account, a retirement plan or an insurance contract.

One distinction matters before any number is entered. An ordinary annuity pays at the end of each period. An annuity due pays at the start. The difference looks small and compounds into real money over a long term.

The future value formula, piece by piece

The future value of a level payment is FV = PMT x (((1 + r)^n - 1) / r). Three symbols carry all the work.

• PMT is the deposit made every period. Here it is monthly.
• r is the interest rate for one period, not for a year. A 6 percent annual rate with monthly deposits gives r = 0.06 / 12 = 0.005.
• n is the total number of deposits. Twenty years of monthly deposits gives n = 12 x 20 = 240.

The formula comes from adding up each deposit with its own growth. The first deposit sits in the account for 239 months and grows the most. The last deposit lands at the end of month 240 and grows for no time at all. Add all 240 of those pieces and the sum collapses into the expression above.

Run the numbers for 300 dollars a month at 6 percent for 20 years. The monthly rate is 0.005 and there are 240 periods. The growth factor 1.005^240 is 3.3102, so the bracket is (3.3102 - 1) / 0.005 = 462.04. Multiply by the 300 dollar payment and the future value is 138,612.27.

That 462.04 is worth a second look. It multiplies the monthly deposit, so a 1 dollar monthly deposit would end at 462.04 dollars after 20 years: 240 dollars of deposits plus 222.04 dollars of interest.

Worked example: $300 a month at 6 percent for 20 years

A 30 year old sets up an automatic transfer of 300 dollars on the last day of every month, into an account that earns 6 percent a year. After 20 years the balance is 138,612.27. The deposits add up to 72,000 dollars, so the interest is 66,612.27, just under half of the final balance.

The path matters as much as the endpoint. After 5 years the balance is 20,931.01 on 18,000 of deposits. After 10 years it is 49,163.80 on 36,000. The second decade produces 53,448.47 of interest, four times the 13,163.80 earned in the first.

Ten more years, from 20 to 30, adds another 162,742.24 to the balance while adding only 36,000 of deposits. The curve is not linear and it never becomes linear.

Ordinary annuity versus annuity due

The timing of each payment changes the answer by one period of interest. An ordinary annuity pays at the end of the period, so the last payment earns nothing. An annuity due pays at the start, so every payment, including the last, earns at least one period.

The whole adjustment is a single multiplication: annuity due value = ordinary value x (1 + r). At a monthly rate of 0.005, that is a 0.5 percent bump. On the 300 dollar plan it turns 138,612.27 into 139,305.33, a difference of 693.06. That 693.06 is exactly 0.5 percent of 138,612.27, which is one month of interest on the whole balance.

Rent is usually due at the start of the month. A paycheck deduction usually lands at the end of a pay period. When you compare two savings plans, check which convention each one uses before you compare the totals.

Present value: what a stream of payments is worth today

Present value runs the same arithmetic backwards. It answers a different question: if someone promised you 500 dollars a month for 10 years, what is that promise worth in one lump sum today, at a 6 percent rate?

The formula is PV = PMT x (1 - (1 + r)^-n) / r. With r at 0.005 and n at 120, the bracket works out to 90.0735, and 500 dollars times that is 45,036.73. The payments add up to 60,000 over the decade, so the other 14,963.27 is interest the money earns while it waits.

That number is what a pension lump sum offer, a lottery payout or a structured settlement is priced against. A lump sum below the present value favors the payer. A lump sum above it favors the person receiving the payments.

The same discounting explains why a dollar paid to you in 20 years is worth less than a dollar today. At 6 percent, a dollar 20 years out is worth about 31 cents now, because 1.06^20 is 3.2071.

Which lever moves the answer: amount, rate or time

Three inputs drive the result, and they do not carry equal weight. The table holds the deposit at 300 dollars a month and varies the rate and the term.

Doubling the deposit doubles the balance, because the relationship is a straight multiplication. Doubling the time more than doubles it. At 6 percent, going from 10 years to 20 years takes 49,163.80 to 138,612.27, which is 2.82 times as much, and going to 30 years takes it to 301,354.51.

Two points of extra return are worth 38,093.85 over 20 years on this plan, and 145,753.32 over 30 years. That is why fees matter: a fund charging one percentage point a year takes roughly that first slice of return, and over a long term the slice compounds away from you. At 5 percent instead of 6, the 20 year balance is 123,310.10, which is 15,302.17 less.

To work backwards from a goal, the payment is goal x r / ((1 + r)^n - 1). Reaching 250,000 in 20 years at 6 percent takes 541.08 a month, and the deposits total about 129,859. Reaching 500,000 in 25 years takes 721.51 a month.

Saving on a schedule in real life

A monthly transfer works because it removes the decision. The amount leaves on payday, before it can be spent, and the account does the compounding without anyone watching it.

Retirement accounts put a ceiling on how much can go in. For 2026 the IRS sets the 401(k) elective deferral limit at 24,500 dollars, with an extra 8,000 dollar catch-up for savers 50 and older, for a total of 32,500. A 300 dollar monthly deposit is 3,600 a year, well inside the limit, and the monthly cap works out to 2,041.67.

An employer match changes the math more than any rate tweak. A plan that matches 50 cents on the dollar up to 6 percent of pay is an immediate 50 percent return on that slice, before any market growth. Capture the full match before increasing deposits anywhere else.

Emergency savings come first for most households, because a car repair charged to a card at 24 percent a year costs more than a savings account earns. The Consumer Financial Protection Bureau's retirement tools cover the wider planning picture, and the SEC's compound interest calculator is a second check on any long term projection.

This page does the arithmetic. It is not investment advice, and it cannot tell you which account or fund to use.

What the calculator leaves out

The result is a clean number built on assumptions, and the assumptions are where real plans drift.

• Taxes. A traditional 401(k) deposit comes out before tax and is taxed on withdrawal. A Roth deposit is taxed now and comes out tax free. The calculator ignores both.
• Fees. A one percentage point annual fee is not a one time cost. On the 300 dollar plan it can remove tens of thousands over 20 years.
• Returns that move. A steady 6 percent is an average, not a promise. A bad decade early in the term hurts more than the same decade late.
• Inflation. The balance is in future dollars. At 3 percent inflation, 138,612.27 in 20 years buys what 76,746.25 buys today.

Insurance annuities add their own layer: mortality charges, administrative fees, surrender periods and commissions. The investor.gov annuities page covers those costs and the claims paying strength of the insurer, which is the risk that matters most in a contract that lasts decades.

A useful habit is to run the plan at a lower rate than you hope for. If the numbers still work at 4 percent, the plan has room to absorb a bad market and a fee increase without collapsing.