Annuity Calculator
Calculate the present and future value of annuity payments. Determine the value of regular periodic payments at a given interest rate.
An annuity, in the broadest sense, is any stream of equal payments made at regular intervals — a pension, a mortgage, a lottery payout, a bond coupon, or a commercial insurance contract. This annuity calculator handles the pure time-value-of-money side of that problem: given a payment amount, rate, and number of periods, what is that stream worth today (present value) and at the end of the term (future value)? It's the workhorse behind comparing pension lump-sum offers, pricing structured settlements, analyzing lease payments, and evaluating bond cash flows.
Annuities also refer to a specific category of insurance product sold in the US — contracts where you hand an insurer a premium in exchange for a stream of future payments. These come in several flavors. An **immediate annuity** (SPIA, single-premium immediate annuity) converts a lump sum into lifetime income starting right away — the simplest form and the closest to pure longevity insurance. A **deferred annuity** lets the premium grow tax-deferred for years before payments begin. Within both categories, payments can be **fixed** (guaranteed amount), **variable** (tied to subaccount performance), or **indexed** (linked to a market index with caps and floors).
The honest picture is mixed. A SPIA purchased at age 70 or later can be a rational longevity hedge, transferring the "what if I live to 100" risk to the insurer for a known price. But most commercial annuities — especially variable and indexed contracts sold to 50-somethings — carry internal fees of 2–3% annually, multi-year surrender charges of 5–10%, and opaque riders that erode returns significantly. The Bogleheads community and many fee-only planners generally recommend building your own "DIY annuity" with low-cost index funds plus a modest SPIA late in retirement, rather than buying a packaged product in your 50s. This tool is educational only, not financial advice.
Quick answer: A $1,000 monthly annuity for 20 years at 5% annual interest has a present value of roughly $151,500 and a future value of about $411,000 if the payments are reinvested. This annuity calculator computes both PV and FV for any payment, rate, term, and frequency combination.
Inputs
Quick presetsDollar amount paid each period — a pension check, bond coupon, or savings deposit.
Discount rate for present value or growth rate for future value. Match rate to the risk of the cash flow.
Total number of years the payments continue. Converted to period count using your frequency selection.
Results
How to use this calculator
Four inputs drive the pure math. **Periodic payment** is the dollar amount paid each period — a $1,200 pension check, a $500 monthly savings contribution, a $2,000 quarterly bond coupon. **Annual interest rate** is the discount rate for PV or the growth rate for FV; pick a rate that matches the risk and duration of the cash flow. For a government pension, the risk-free Treasury rate is defensible; for a projected savings stream, use your expected portfolio return.
**Number of periods** is entered in years; the calculator converts to total payment periods using your **payment frequency** selection (monthly, quarterly, or annually). The output gives three numbers: **present value** (the lump sum today that's equivalent to the stream), **future value** (what the stream is worth at the end of the term), and **total payments** (the undiscounted sum of all payments — a useful sanity check). Note that this calculator uses ordinary-annuity conventions (payments at period-end). For annuity-due math (payments at period-start, like rent or insurance premiums), multiply the result by (1 + periodic rate).
Worked examples
Pension lump-sum vs. lifetime payments
Raj, age 62, is offered $3,200/month for life from his employer's pension, or a $520,000 lump sum today. To compare, he calculates the present value of the income stream using a 5% discount rate and an assumed 25-year life expectancy: $3,200 × 12 = $38,400/year, which over 25 years at 5% has a present value of roughly $541,400. The monthly stream beats the lump sum by about $21,000 in today's dollars — but only if he lives 25 years. Longevity risk, inflation protection (COLA), and survivor benefits tilt the decision further.
Building savings with a fixed deposit stream
Priya sets up an automatic $1,500 quarterly transfer into a taxable brokerage account. At a 6% assumed return, compounded quarterly, over 25 years, the future value of the annuity is about $346,700. Her total contributions were $150,000, so compound growth delivered about $196,700 of the ending balance. If she bumps the quarterly amount to $2,000, the final balance rises to roughly $462,200 — a $115,000 gain from an extra $500/quarter.
Lottery lump sum vs 20-year payout
Elena wins a lottery advertised as "$10 million over 20 years" — $500,000/year. The state also offers a $6.2M cash lump sum today. To compare honestly she discounts the annual payments at a 5% rate (roughly the long Treasury yield). Inputs: payment $500,000, rate 5%, periods 20, annually. The present value of the stream comes out near $6.23M — within a hair of the cash offer. At a 7% discount rate (if she's confident investing), PV drops to roughly $5.30M, making the lump sum clearly better. The "right" answer depends entirely on the discount rate she believes she can earn after taxes.
Frequently asked questions
Ordinary annuity vs annuity due — what's the difference?
An ordinary annuity pays at the end of each period (bonds, most loans, typical pensions). An annuity due pays at the beginning (rent, insurance premiums, some retirement withdrawals). Annuity-due values are always (1 + r) larger than ordinary-annuity values for the same stream, because each payment has one extra period of growth.
Immediate vs deferred annuity?
Immediate annuities (SPIAs) start paying within a year of purchase — you hand over a lump sum, the insurer sends you income for life. Deferred annuities accumulate for years or decades before conversion to income; variable and indexed versions fall in this bucket. SPIAs are structurally simpler and generally cheaper than deferred products.
Fixed, variable, or indexed annuity?
Fixed annuities pay a guaranteed amount — simple but inflation-exposed. Variable annuities invest premiums in subaccounts, with returns and fees tracking market performance. Indexed annuities link to a market index but cap upside (often 5–8%) and floor downside (typically 0%); the caps and participation rates change over time, and the products are notoriously complex.
What are surrender charges?
Most deferred annuities impose a declining fee — often starting at 7–10% in year 1 and phasing out over 5–10 years — if you withdraw more than a small free-withdrawal amount during the surrender period. They're a significant lock-in feature and one of the biggest reasons to understand what you're buying before signing.
What fees do commercial annuities charge?
Variable annuities commonly run 2–3% all-in: mortality and expense (M&E) charges, subaccount fund fees, administrative fees, and optional rider fees (lifetime income benefit, guaranteed minimum withdrawal). Indexed annuities bury costs in caps and participation rates rather than explicit fees. SPIAs are priced in the payout rate — no explicit fee line.
When do annuities actually make sense?
The strongest case is a SPIA purchased at 70+ as longevity insurance — you're buying a guaranteed income stream that hedges the risk of outliving your assets. Some retirees with no pension and anxiety about market volatility also value the psychological certainty. Most planners would avoid variable and indexed annuities sold to pre-retirees; the fees usually swamp the benefits.
Why do Bogleheads generally avoid commercial annuities?
Two reasons. First, the fees (2–3% annually plus surrender charges) compound against you for decades. Second, most of the "features" — tax deferral, principal protection, income guarantees — can be replicated more cheaply with a taxable brokerage in index funds, I-bonds, and a late-life SPIA. Simpler, cheaper, more flexible.
What is a SPIA and how does it work?
A single-premium immediate annuity converts a lump sum into lifetime income starting right away. You give an insurer, say, $200,000 at age 70; they pay you a fixed amount (perhaps $14,000/year for life) until you die. The payout rate depends on age, gender, interest rates, and whether you elect survivor or inflation-adjustment riders. No ongoing fees, just the embedded pricing.