Online Calculators since 2009
Use Present Value of Annuity Calculator to calculate the present value of your Annuity (a pension pot for example) based on the known interest rate and period of time until the annuity is reached (retirement age, disability or death).
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The present value of an annuity is based on the time value of money. It is the current value of future payments that could be received. The value is calculated using a specific rate of return.
The term annuity is used for a series of fixed payments paid to you or required to be collected from you. This is done for a fixed time period, excluding retirement plans where annuities are paid for a lifetime after retirement. A frequency of payment is always specified, it can be monthly, quarterly, semi-annually or annually.
What if you were given a choice of being paid for 10k today or 1k each year for the next 10 years? Anyone would choose the first option. This is not just because you can't wait for the money to be received in 10 years, there is more to it. This is due to time value of money.
To continue with the example above, 10k received right now can be invested to earn interest payments. The money invested in lump sum will generate more interest than money invested over the years, even if invested on the same rate of interest.
Calculating present value of an annuity can be a hassle, but at the same time it is important to know the details before you consider investing. Below are the factors that you must know while using a calculator to learn about the present value of annuity.
Based on inputs, you will see the results as present value of your annuity. This can be viewed as:
The present value of annuity calculation takes place in different circumstances, examples are as follows:
For instance, you are granted a cash settlement of 2k per month for a period of 20 years. However, you are not comfortable with that arrangement and want to opt for a one time cash settlement. The present value of this can be calculated with present value of an annuity method. This will help you make an appropriate decision.
In summary, the calculation of the present value of an annuity can be a complicated task. At the same time, it is a very important factor when it comes to your financial and retirement planning.
The calculator enables you to complete these calculations easily as it is online, free to use and time saving. You just have to collect the correct data in order to compute the present value of an annuity. It will help you make better decisions with just a few inputs and clicks.
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