Annuities Explained: What Regular Annual Payments Grow Into
An annuity turns a yearly payment into a future sum. This guide explains the formula in plain terms.
What is the Annuity Calculator?
This calculator finds the future value of an annuity, a series of equal payments made once a year. It uses the formula future value = payment times ((1 + r) raised to the power of n, minus 1) divided by r, where r is the annual rate and n is the number of years. It assumes each payment is made at the end of the year.
How to use it
- Enter the amount you will pay or receive each year.
- Enter the annual interest rate and the number of years.
- Press Calculate to see the future value, total contributions and growth.
Worked example
Pay 1,000 a year at 5% per year for 10 years. The tool gives a future value of 12,577.89, total contributions of 10,000 and growth of 2,577.89.
How do you calculate the future value of an annuity?
Grow each annual payment forward for the years remaining after it is paid, then add them all up. The formula summarises that in one step: payment times the growth factor minus one, divided by the rate. Payments made earlier contribute more, because they have longer to earn interest.
Frequently asked questions
What is an annuity?
An annuity is a stream of equal payments at regular intervals, such as annual contributions to a savings plan or yearly payouts from a retirement product.
What if the interest rate is zero?
Then the future value is simply the annual payment times the number of years, because no interest is earned. The calculator handles that case automatically.