# Annuity Payment Calculator Guide

There are several types of annuity payment calculators, each designed for slightly different annuities. The Immediate Annuity Calculator below can be used to determine monthly payouts for a single premium immediate annuity (SPIA). The Future Value Annuity Calculator can be used to determine the grand total of a deferred fixed annuity in x number of years. The Present Value Annuity Calculator can be used to determine the premium necessary to reach a future savings target with a deferred fixed annuity.

» Present Value Annuity Calculator

» Future Value Annuity Calculator

» Immediate Annuity Calculator

## Time-Value of Money

An annuity payment calculator is based on a time-value of money formula. The foundation of this formula is the fact that a dollar held today has more value than a promise or expectation of a dollar to be received at a future time. This is because today’s dollar can be invested and accrue interest. The critical element of the time-value of money is that a single amount, or a series of regularly received payments promised in the future, can be converted to a current equivalent value. An annuity calculator can also determine the total amount of money a series of future payments will provide at a specified date.

## Annuity Payment Calculator Variables

*Starting principal*, which is expressed as dollars, is the beginning balance of the annuity plan. It is also called the *present value* of the annuity. The *annual interest rate* is expressed as a percentage. It is the rate earned by your funds during a year, and determines how steeply your money compounds. The *payment period* is the number of years during which the annuity will last and generate interest. *Annuity payments* are the payouts received from the annuity every monthly, although semi-monthly and yearly payout options exist.

## Using an Annuity Payment Calculator

The following example uses our future value annuity payment calculator. This calculator can quickly determine how much your annuity will be worth in a given number of years at a given interest rate.

Using the calculator is simple: Enter the fixed rate your annuity offers, or you plan to receive. Then, enter the contract term, the initial premium, and any additional contributions you will be making on a monthly basis. (For a single-premium fixed annuity the money contribution will be zero.) Now click “calculate” to receive the answer. This is what your annuity would be worth at the of its term. Let's consider an example:

If you have a starting principal amount of $50,000 that's to compound tax-deferred over a period of 40 years at an interest rate of 6%, the final account balance would be: $301,128. To determine your net income, subtract out taxes according to your tax bracket. In this example, let's assume a middle-of-the-road state & federal rate of 25%. In that case, the net total would be $238,346. We arrive at this number by first substracting the initial principle from the grand total (because only income gets taxed), multiplying by .75, and adding back the $50,000 initial principle. The calculation looks like this:

($301,128 - $50,000) * 0.75 + $50,000 = $238,346.

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