Annuity Worth Calculator
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Annuity Worth Calculator
Annuity Future Worth
—
Total Value
Understanding Annuity Worth
An annuity is a series of equal payments made at regular intervals. Whether it's for savings, retirement planning, or structured settlements, understanding the future worth of an annuity is crucial for financial decision-making. This calculator helps you determine the total value your annuity will accumulate over time, considering both your contributions and the compound interest earned.
How the Annuity Worth is Calculated
The calculation depends on whether the payments are made at the beginning or end of each period, and the interest rate applied. The formulas used are:
1. Future Worth of an Ordinary Annuity (Payments at the End of Period):
This formula calculates the future value (FV) of an annuity where each payment is made at the end of its respective period.
Formula: FV = P * [((1 + r)^n - 1) / r]
Where:
FV = Future Worth of the AnnuityP = Periodic Payment Amountr = Interest Rate per Period (as a decimal)n = Number of Periods
2. Future Worth of an Annuity Due (Payments at the Beginning of Period):
This formula calculates the future value (FV) of an annuity where each payment is made at the beginning of its respective period. Since each payment earns interest for one extra period compared to an ordinary annuity, the result is higher.
Formula: FV = P * [((1 + r)^n - 1) / r] * (1 + r)
Or, simply the future worth of an ordinary annuity multiplied by (1 + r).
Where:
FV = Future Worth of the Annuity DueP = Periodic Payment Amountr = Interest Rate per Period (as a decimal)n = Number of Periods
Example Calculation:
Let's consider an example. Suppose you invest $1,000 per month for 10 years (which is 120 periods). The annual interest rate is 6%, compounded monthly. This means the interest rate per period (monthly) is 0.5% (or 0.005 as a decimal).
- Scenario 1: Ordinary Annuity (Monthly payments at the end of each month)
- P = $1,000
- n = 120
- r = 0.005
- FV = 1000 * [((1 + 0.005)^120 – 1) / 0.005]
- FV = 1000 * [((1.005)^120 – 1) / 0.005]
- FV = 1000 * [(1.81939673 – 1) / 0.005]
- FV = 1000 * [0.81939673 / 0.005]
- FV = 1000 * 163.879346
- FV ≈ $163,879.35
So, the future worth of your annuity would be approximately $163,879.35.
- Scenario 2: Annuity Due (Monthly payments at the beginning of each month)
- FV (Ordinary) = $163,879.35
- FV (Annuity Due) = FV (Ordinary) * (1 + r)
- FV (Annuity Due) = $163,879.35 * (1 + 0.005)
- FV (Annuity Due) = $163,879.35 * 1.005
- FV (Annuity Due) ≈ $164,700.75
The future worth for an annuity due would be approximately $164,700.75, as each payment has an additional period to grow.
When to Use This Calculator:
- Retirement Planning: Estimate the future value of your retirement contributions (e.g., 401k, IRA).
- Savings Goals: Project how much savings you'll have for a down payment, education, or other long-term goals.
- Investment Analysis: Evaluate the potential growth of regular investments.
- Loan Payoffs: While this calculates worth, understanding the future value of payments can also inform strategies for debt repayment.
- Structured Settlements: Understand the future value of payouts received over time.
By accurately calculating the future worth, you can make more informed financial decisions and better plan for your future.
function calculateAnnuityWorth() {
var paymentAmount = parseFloat(document.getElementById("paymentAmount").value);
var numberOfPeriods = parseInt(document.getElementById("numberOfPeriods").value);
var interestRatePerPeriod = parseFloat(document.getElementById("interestRatePerPeriod").value) / 100; // Convert % to decimal
var paymentTiming = document.getElementById("paymentTiming").value;
var result = 0;
var formattedResult = "–";
var resultUnit = "Total Value";
// Validate inputs
if (isNaN(paymentAmount) || isNaN(numberOfPeriods) || isNaN(interestRatePerPeriod) || paymentAmount < 0 || numberOfPeriods <= 0) {
alert("Please enter valid positive numbers for all fields.");
return;
}
if (interestRatePerPeriod === 0) {
// Simple multiplication if no interest
result = paymentAmount * numberOfPeriods;
} else {
var compoundFactor = Math.pow(1 + interestRatePerPeriod, numberOfPeriods);
if (paymentTiming === "ordinary") {
// Ordinary Annuity formula: FV = P * [((1 + r)^n – 1) / r]
result = paymentAmount * ((compoundFactor – 1) / interestRatePerPeriod);
} else { // annuity_due
// Annuity Due formula: FV = P * [((1 + r)^n – 1) / r] * (1 + r)
result = paymentAmount * (((compoundFactor – 1) / interestRatePerPeriod) * (1 + interestRatePerPeriod));
}
}
// Format the result to two decimal places and add comma separators
if (!isNaN(result)) {
formattedResult = result.toLocaleString(undefined, {
minimumFractionDigits: 2,
maximumFractionDigits: 2
});
}
document.getElementById("result").innerText = "$" + formattedResult;
document.getElementById("result-unit").innerText = "Future Worth";
}