An annuity, as used here, is a series of regular, periodic payments to or withdrawals from an investment account. Wikipedia lists these examples of annuities "regular deposits to a savings account, monthly home mortgage payments, monthly insurance payments, and pension payments." We can classify annuities by the frequency of the cash flow dates. The investor may make deposits (withdrawals, payments) weekly, monthly, quarterly, yearly, or at any other regular interval of time. This calculator supports eleven frequencies.
The future value of an annuity is the amount the cash flow will be worth as of a future date. Due to the investment gain or interest earned on the principal (the amount deposited), the final value is greater than the sum of the deposits.
This future value of an annuity (FVA) calculator calculates what the value will be as of any future date. The calculator optionally allows for an initial amount that is not equal to the periodic deposit. This feature enables the user to calculate the FVA for an existing investment.
If the investment is a new investment set the "Starting Amount (PV)" to 0.
This FVA calculator also calculates the future value after a series of withdrawals. If you start with $1,000,000 and assume it earns 4.0% per year, the calculator will calculate the value after 30 years of $5,000 monthly withdrawals. To indicate a withdrawal, enter a negative amount.
Do you also want to factor in taxes, investment fees or inflation into your future value calculations? Then see this Investment Calculator. It also allows you to export to MS Word/.docx and MS Excel/.xlsx files.
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Instructions for the future value of an annuity calculator
- Starting amount (PV): This is the money you have at the beginning of the annuity period. It could be the initial investment amount or the current value of an existing annuity.
- Periodic amount: This is the amount of money you will withdraw (-) from or contribute (+) to the annuity regularly. The terms of the annuity will determine the amount and frequency.
- Number of periods: This is the number of times the periodic cash flow will occur.
- Annual interest rate: This is the interest rate that the annuity will earn. It is expressed as a percentage per year.
- Start date: This is the present value date (see note below). It could be the date you purchase the annuity or another predetermined date.
- First contribution date: This is when you will make your first contribution (or withdrawal) from the annuity. It could be the same as the start date or a later date.
- Cash flow frequency: This is the frequency with which you will contribute to or withdraw from the annuity. It could be monthly, quarterly, annually, or another interval.
- Monthly compounding: This refers to the frequency with which the interest on the annuity will be compounded. If you do not know the compounding frequency, then set it to match the cash flow frequency.
Note: As explained, an annuity is a regular cash flow - either scheduled contributions or withdrawals. However, because this calculator lets the user specify both a first cash flow date and a start date that may not align with the cash flow, the calculator can accurately calculate the future value. This is the case even if the cash flows don't start until years later.
Future Value Schedule Help
Money, in any form (cash, investments, receivables, etc.) will have a different value tomorrow or next month or next year than it does today. Even money stuffed in a mattress won't have the value in a year from now as it does today. That value is known as the "future value."
You must enter either a "Starting Amount" (the cash-on-hand) or the "Regular Contribution Amount" or both. Set how often you add to your investment by setting the "Contribution Frequency". If you set the "Contribution Frequency" to monthly and enter 120 for "Number of Contributions" then the "Future Value" will be for the date 10 years from the "First Contribution Date" (120 monthly contributions = 10 years).
A note or two about "Compounding Frequency". Selecting he "Exact/Simple" option sets the calculator so it will not compound the interest. Also, the exact number of days between withdrawal dates is used to calculate the interest for the period. The "Daily" option uses the exact number of days between dates, but daily compounding is assumed. (The interest earned each day is added to the principal amount each day.) The "Exact/Simple" compounding option is the most conservative setting. That is, using it will result in the lowest future value. Daily compounding will result in nearly the greatest future value (except for "Continuous Compounding".
The other compounding frequencies are based on periods of time other than days. Each period is assumed to be of equal length for the purposes of interest calculations. That is, assuming a balance of $10,000, the interest earned for January will be the same interest earned for February given the same interest rate.
NOTE: The future value maybe lower than the value reflected today — think inflation. To reflect that fact, simply use a negative interest.