An annuity is a series of equal payments made at regular intervals. The "future value of an annuity" refers to the total worth of a series of payments at a specified future date, considering the effect of compound interest. This calculation is crucial for financial planning, helping individuals and businesses estimate the future worth of their investments or savings.
The Formula
The formula for the future value (FV) of an ordinary annuity is:
FV = P * [ ((1 + r)^n – 1) / r ]
Where:
FV = Future Value of the Annuity
P = The amount of each periodic payment
r = The interest rate per period
n = The total number of periods
In our calculator, we first need to adjust the annual interest rate and the number of years based on the payment frequency to get the correct rate per period (r) and the total number of periods (n).
Rate per period (r) = (Annual Interest Rate / 100) / Payments Per Year
Total number of periods (n) = Number of Years * Payments Per Year
How the Calculator Works
Our calculator takes the following inputs:
Periodic Payment Amount (P): The fixed amount paid at each interval.
Annual Interest Rate (%): The stated yearly interest rate of the investment.
Number of Years: The total duration of the annuity payments.
Payments Per Year: How frequently payments are made (e.g., monthly, quarterly, annually).
It then computes the future value using the described formula, providing you with an estimated total sum at the end of the investment term.
Use Cases
The future value of an annuity is invaluable for:
Retirement Planning: Estimating how much a regular savings plan will be worth by retirement.
Investment Growth Projections: Forecasting the potential growth of investments made through regular contributions.
Goal Setting: Determining the future value of savings for specific goals like a down payment on a property or funding education.
By understanding the future value of your annuities, you can make more informed financial decisions and better plan for your financial future.
function calculateAnnuityFV() {
var periodicPayment = parseFloat(document.getElementById("periodicPayment").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var numberOfYears = parseInt(document.getElementById("numberOfYears").value);
var paymentFrequency = parseInt(document.getElementById("paymentFrequency").value);
var resultElement = document.getElementById("result-value");
resultElement.textContent = "–"; // Reset result
// Input validation
if (isNaN(periodicPayment) || periodicPayment < 0) {
alert("Please enter a valid positive number for the Periodic Payment Amount.");
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
alert("Please enter a valid positive number for the Annual Interest Rate.");
return;
}
if (isNaN(numberOfYears) || numberOfYears < 1) {
alert("Please enter a valid number of years (at least 1).");
return;
}
if (isNaN(paymentFrequency) || paymentFrequency < 1) {
alert("Please select a valid payment frequency.");
return;
}
// Calculations
var ratePerPeriod = (annualInterestRate / 100) / paymentFrequency;
var totalPeriods = numberOfYears * paymentFrequency;
var futureValue;
// Handle the case where ratePerPeriod is 0 to avoid division by zero
if (ratePerPeriod === 0) {
futureValue = periodicPayment * totalPeriods;
} else {
// FV = P * [ ((1 + r)^n – 1) / r ]
futureValue = periodicPayment * (Math.pow(1 + ratePerPeriod, totalPeriods) – 1) / ratePerPeriod;
}
// Display result with currency formatting (e.g., USD)
// Using toLocaleString for flexible currency formatting
resultElement.textContent = futureValue.toLocaleString('en-US', { style: 'currency', currency: 'USD' });
}