This calculator will compute the present value of a series of equal cash flows to be received in the future.
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Annuity Strategy Calculations
Retirement strategies are as diverse as the individuals undertaking to save for their golden years, providing countless options for growing wealth. Planning to leave the workforce requires attention to a number of personal characteristics including age, affluence and retirement goals. Structuring plans places variable weights on each investment goal, leading to prudent conclusions about where to place retirement resources.
Stocks, bonds, mutual funds and other investment vehicles fill-out investment accounts, providing annual percentage returns in the single-digits and beyond. Establishing the right mix of investments helps mitigate risk and ensures accounts will grow steadily.
Blended solutions provide the best investment packages, because poorly performing stocks and mutual funds are offset by other investments doing better in the markets. Various calculators help establish which approach is best for an individual investor, including close looks at investment options called annuities.
Annuities Fund Retirement
Annuities represent investment options that pay steady returns during retirement. Money is first invested into particular annuity products, structured to provide steady streams of income for the future. Many annuities are established to pay until the end of an investor's life, but they can also be set-up for specific terms. For example, 65 year-old retirees banking on 85-year life spans may wish to establish 20-year annuities, to maximize the value of each payment.
Annuity payments are made at various intervals: Monthly, quarterly, annually and even lump sums in unique cases. Present value of annuity calculator looks at a series of equal cash payments to be made in the future, distilling their value today. The information is used by investors to guide retirement planning decisions and move asset accumulation forward.
Types of Annuities
Annuities are structured in two fundamentally different ways, each carrying its own set of advantages:
- Fixed Annuities – Investors seeking the steadiest returns capitalize on fixed annuities, which pay the same amount during each distribution period. The guaranteed form of payout provides budgeting regularity reassuring to conservative retirees.
- Variable Annuities – For investors with a greater appetite for risk, or those not counting on the uniformity of equal annuity payments, variable annuities provide prudent options. Variable annuities make payments that are tied to the way the investment performs. As a result, lean times lead to lower payments, while performance booms land larger periodic installments for investors.
Further distinction is made between immediate and deferred annuities:
- Deferred Annuities – Annuities are set up depending on when you need to start receiving payments. Deferred options place the original investment in an account, leaving it there to generate investment income until such time as payments are required. The longer the investment grows without withdrawals being made, the more resources are available for future payments.
- Immediate Annuities – Investors closer to retirement age, and those requiring immediate payments establish annuities to provide returns right-away. Rather than deferring withdrawals while investments grow, immediate annuities are set-up to give-back at once.
Present value of annuity calculator helps investors evaluate various terms, providing insight into the current value of annuity distributions taking place in the future. Using calculator data, consumers choose among various options, which includes selling an annuity for a one-time lump sum.