When you are the recipient of an annuity, it’s vital that you understand how much that it is worth. You can figure this out by using an annuity formula. In order to figure out an annuity payment formula is to use a special annuity calculator.

How Does An Annuity Formula Work?

An annuity formula helps you to figure out how much the income from the whole annuity will be over the course of your lifetime. This is a vital thing to know so that you can figure out your financial future. All annuities pay out in scheduled payments, which may be as a monthly annuity formula or in some other agreed upon timeframe such as quarterly or semi-annually. It all depends on the contract you make with the company that buys the annuity.

annuity formula

Current and Future Values Are Important

When you are considering the values of your annuity, you need to know the present value of annuity formula in order to determine its future value. The future value of an annuity is figured out by determining the value of all the payments over the investment timeframe and then adding up the total results.

This makes your annuity formula dependent upon your annuity investment you make. For instance, if your annuity payment was $100 then it will be worth more in the future and that is known as the return on investment. So, you will need to know how much your annuity is worth now, the amount of interest it is going to get in the future, and how much time it will be held. Then you can do the math and figure out how much you will get using this annuity formula.

annuity formula

How do you Figure the Formula?

It is figured out by this formula: Future Value (FV) = Present Value (1+ the interest rate) to the power of n (the period of time your money is held in an annuity account.

Ultimately, an annuity payment formula is something used to figure out how much the future payment will be on your annuities, which you will get dependent upon the agreement of your annuity contract. If you are planning on getting an annuity deal, then you need to study all of the possible risks involved in making such an investment. If they have done this and determined it is what is best for their situation, then the annuity formula will help them figure out the proceeds.