How do you use an annuity calculator?


Quick Answer

The calculator at Bankrate.com requires users to input data that includes withdrawal amount, length of annuity in years, withdrawal frequency and initial principal to obtain needed results. In contrast, the number cruncher at CNNMoney’s website requires users to simply indicate their state, gender, age and lump sum, while Wells Fargo Advisor’s online offering asks for the user’s tax bracket, starting investment and contribution frequency, among other details.

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Full Answer

The comprehensive annuity calculator at Pine Grove Software’s website requires users to enter a large number of details — current date, compounding frequency, expected date of first future payment, and number of cash flows, among other information — to generate results. The calculator can also compute problems in euros and sterling, in addition to U.S. dollars.

Microsoft’s Excel spreadsheet software can also be used to calculate annuities, explains the Houston Chronicle. The program offers several functions that can be utilized to compute present value, interest rates, monthly payments and number of payments.

In general, annuities are loans or investments that pay fixed amounts of money regularly until the account is either paid off or exhausted, reports the Houston Chronicle. Common examples of annuities include mortgages, car loans and retirement annuities. When calculating annuities, several concepts are utilized, reports Pine Grove Software. These include present value, which refers to the current value of future payments, and discount rate, which is the expected rate of return on an investment.

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