What is an Annuity?
An annuity is a series of equal payments made at regular intervals. This calculator focuses on the **accumulation phase** — how regular contributions grow with compound interest over time.
Key Formulas
Future Value of Ordinary Annuity
FV = P × [((1 + r)^n − 1) / r]
Where:
• P = Payment amount per period
• r = Interest rate per period
• n = Total number of periods
Future Value of Annuity Due (payments at beginning): Multiply the result by (1 + r)
Important Concepts
- Ordinary Annuity: Payments made at the end of each period (most common for savings plans).
- Annuity Due: Payments made at the beginning of each period (slightly higher future value).
- Compound Interest: Interest earns interest on previous interest, accelerating growth over long periods.
- Time Horizon: The longer your money compounds, the more powerful the effect becomes.
Tips for Maximizing Growth
- Start early — time is the most powerful factor in compound growth.
- Increase contributions over time as your income grows.
- Choose investments with reasonable expected returns for your risk tolerance.
- Minimize fees — high fees can significantly reduce long-term growth.