Frequently asked questions
What's the difference between an ordinary annuity and an annuity due?
In an ordinary annuity, payments occur at the end of each period (like rent paid at month-end). In an annuity due, payments occur at the start (like lease payments due upfront). An annuity due earns slightly more because each payment has one extra period to compound.
How does payment frequency affect the future value?
More frequent payments at the same total annual amount yield a slightly higher future value because each payment starts earning interest sooner. Monthly contributions of $500 will accumulate more than a single $6,000 annual contribution at the same rate, because earlier payments compound longer.
Is this the same as an insurance annuity product?
No. This calculates the financial concept of an annuity (a series of equal payments). Insurance annuity products may use this math internally but add fees, guarantees, and insurance features. Use the annuity payout calculator if you want to see how much income a lump sum produces.
What interest rate should I assume?
Match it to your actual investment. Savings accounts: 3-5%. Bonds: 4-6%. Balanced funds: 6-7%. Stock index funds: 7-10% historically. For long-term planning, use a conservative estimate that's 1-2% below the historical average for your asset class.
Can this calculator handle growing payments?
This calculator assumes fixed payments. If your contributions increase over time (e.g., you plan to raise them annually with salary growth), use the compound interest calculator with its annual step-up feature, which models exactly that scenario.
What's the formula used?
FV = PMT × [(1+r)^n − 1] / r for an ordinary annuity, and FV = PMT × [(1+r)^n − 1] / r × (1+r) for an annuity due. PMT is the payment, r is the interest rate per period, and n is the total number of periods.