The annuity calculator is a well-featured tool that makes it easy to find the final balance - the future value of annuity - of a series of payments made at equal intervals and follow the progress of balances with a dynamic chart and annuity table. You can apply the annuity calculator for a wide range of annuities. For example, you can use it either for regular deposits or withdrawals, for multiple frequencies, or you can compare ordinary annuity vs. annuity due.

In the following, we explain what the annuities definition is and show you some annuity examples to provide better insight into how do annuities work. You can also read about the types of annuity and learn the growing annuity formula.

Still, if you are more interested in finding out how much money you can withdraw throughout a given interval or how long you can withdraw a specific amount of money to deploy the annuity's balance, jump to our annuity payout calculator. Besides, if you would like to know the initial balance you need to reach a certain future value, check our present value of annuity calculator.

What is the annuities definition? - How do annuities work?

Annuities are one of the most fundamental financial structures. To put it simply, any financial product that involves a series of payments made at equal intervals is an annuity. But let's take a closer look at the annuities definition. The series of payments can be either deposits (with positive signs) or withdrawal (with negative signs). Therefore, if you make regular deposits into a savings account, monthly home mortgage, monthly insurance account or pension plan, you happen to face an annuity.

However, in practice and in everyday life annuity meaning takes a more explicit form. So, what does annuity mean? Buying an annuity usually refers to investment plans, for example insurance products, that provide a steady stream of income in retirement. For example, you can buy an annuity that requires a single upfront payment, or a series of payments to the insurance company. Then, the insurance company pays you either one lump-sum or multiple payments if the insurance pays out.

Types of annuity

As you probably already know, annuities have many faces. In general, the types of annuity are classified according to the following features.

  1. Timing of payments - Ordinary annuity vs. annuity due
  • Ordinary annuity or annuity-immediate - Payments are made at the end of the periods - mortgages, car loans, and student loans are conventionally ordinary annuities.

  • Annuity due - Payments are made at the beginning of each period - rental lease payments, life insurance premiums are considered annuity due.

  1. Contingency of payments - Guaranteed annuities vs. contingent annuities
  • Annuities certain or guaranteed annuities - It provides payments that will be paid over a period fixed in advance.

  • Contingent annuities - It pays over the annuitant's remaining lifetime - a typical example is a life annuity.

  1. Variability of payments
  • Fixed annuities - It guarantees a fixed return on the initial investment. The Securities and Exchange Commission does not regulate fixed annuities.

  • Variable annuities - It makes a direct annuity investment into various funds especially created for variable annuities. They are registered products that are regulated by the SEC in the United States of America.

  • Equity-indexed annuities - The annuity payouts are linked to an index. Typically, the minimum payment will be 0%, and the maximum will be predetermined. The credited amount to the customer depends on the performance of the underlying index.

  1. Deferral of payments - Immediate vs. deferred annuity
  • Deferred annuity - The payments begin only after a certain period.
  • Immediate annuity - An annuity which begins payments without a deferral period.

Note, that the present annuity calculator can deal exclusively with fixed immediate annuities.

How to use the annuity calculator? - Annuity examples

You need to set the following variables to make the calculator work.

  • Initial balance - The present value of the annuity, that is, the balance at the beginning of the annuity.
  • Annuity payment - The amount of regular deposit (with a positive sign) or withdrawal (with a negative sign).
  • Annuity frequency - The regularity of withdrawal or deposit.
  • Type of annuity - You can choose between an annuity due (beginning of period) or an ordinary annuity (end of period).
  • Length of annuity - The interval during which the annuity pays.
  • Interest rate - The rate of return by which an annuity grows each year.
  • Compounding method - The frequency interest is added to the balance.
  • Annual growth rate (available in advanced mode) - By this option, you can set a specific rate of change (increase or decrease) in your annuity payout.

When you set all the required parameters, you will immediately see the results summarized in a table. You can also follow the progress of your annuity balance in a dynamic chart and annuity table of the payment schedule.

The best way to demonstrate the strengths of the annuity calculator is to take some annuity examples.

  1. Annuity with fixed deposits

Let's assume you decide to put aside 100 dollars at the end of each month and pay into an annuity where the guaranteed interest rate is 5 percent, compounded monthly. What will be the future value of your annuity after ten years?

  • Initial balance = $0
  • Annuity payment = $100
  • Annuity frequency = Monthly
  • Type of annuity = Annuity due
  • Length of annuity = 10 years
  • Interest rate = 5%
  • Compounding method = Monthly

After setting the above parameters, you can read that the annuity's future value is $15,528.23.

  1. Annuity with fixed withdrawal

Let's say you have 10,000 dollars savings and you decide to buy an annuity with a 5 percent interest rate (compounded monthly) where you can withdraw 100 dollars at the beginning of each month. What will be the balance of your annuity after ten years?

  • Initial balance = $10,000
  • Annuity payment = -$100
  • Annuity frequency = Monthly
  • Type of annuity = Annuity due
  • Length of annuity = 10 years
  • Interest rate = 5%
  • Compounding method = Monthly

After setting the above parameters, you will see that the annuity's future value is $877.17.

The growing annuity formula

With the present annuity calculator you can also find out the future value of a growing annuity. In the case of growing annuity, the amount of a series of cash flows, or payments, grows at a proportionate rate. The most straightforward growing annuity formula takes the following form:

FV = P * ((1 + r)ⁿ - (1 + g)ⁿ) / (r - g)),


  • FV - Future value of the growing annuity;
  • P - The amount of the series of deposits (positive sign) or withdrawals (negative sign) made at equal intervals;
  • r - Interest rate;
  • g - Growth rate; and
  • n - Number of periods.


You should consider the annuity calculator as a model for financial approximation. All payment figures, balances, and interest figures are estimates based on the data you provided in the specifications that are, despite our best effort, not exhaustive.

For this reason, we created the calculator for instructional purposes only. Still, if you experience a relevant drawback or encounter any inaccuracy, we are always pleased to receive useful feedback and advice.

Tibor Pal, PhD candidate
Main specifications
Initial balance
Type of payment
Annuity frequency
Type of annuity
Ordinary annuity (end of period)
Length of annuity
Interest rate
Compounding method
Final amount$47,554.91
Initial balance$10,000.00
Total deposit$12,000.00
Interest amount$25,554.91
Interest on initial bal.$17,070.41
Interest on deposit$8,484.50
chart of balances
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