Annuity Calculator 2026

An annuity is a series of equal payments made at regular intervals over time. In finance, the term covers two broad categories: (1) investment/savings annuities, where you make periodic payments that grow with interest (like contributing to a retirement account), and (2) income annuities, where an insurer pays you a regular income stream in exchange for a lump sum. In both cases, the core math involves present value, future value, payment amount, interest rate, and number of periods.

Present value (PV) of an annuity is the total worth of all future payments in today's dollars — it answers 'how much is this stream of payments worth right now?' Future value (FV) is the total accumulated value of all payments at the end of the term, assuming reinvestment at the stated interest rate. PV is used to price pension obligations or determine a lump-sum buyout value; FV is used to project retirement savings or target nest egg amounts.

In an ordinary annuity (also called annuity in arrears), payments are made at the end of each period. A mortgage is the most common example. In an annuity due, payments are made at the beginning of each period — rent and insurance premiums are common examples. Annuity due is always worth slightly more than an ordinary annuity because each payment is received (or made) one period earlier, giving it more time to earn interest.

At 5% annual interest over 20 years (monthly payments, ordinary annuity), a $100,000 present value annuity pays approximately $660/month. Over 30 years at the same rate, monthly payments drop to approximately $537. The monthly payment depends heavily on the interest rate and term — higher rates and shorter terms produce larger payments. Use this calculator with your specific rate and term for an exact figure.

For immediate income annuities from insurers, rates in 2026 typically range from 5–7% effective yield depending on age, term, and insurer. Fixed deferred annuities (savings type) offer 4–6% guaranteed rates. Variable annuities return is tied to market performance. For comparison purposes, the 10-year Treasury rate is a common benchmark — annuity rates should exceed this to be competitive. Always compare the annuity's implied yield against buying Treasury bonds directly.

Tax treatment depends on the annuity type. For non-qualified annuities (funded with after-tax dollars), only the earnings portion of each payment is taxable as ordinary income — the principal is not taxed again. For qualified annuities (funded with pre-tax dollars like an IRA or 403(b)), the entire payment is taxable as ordinary income. Annuity withdrawals before age 59½ also face a 10% IRS early withdrawal penalty on top of income taxes.

For an ordinary annuity: PV = PMT × [1 − (1 + r)^−n] / r, where PMT is the periodic payment, r is the periodic interest rate (annual rate / payment frequency), and n is the total number of payments. For an annuity due, multiply the result by (1 + r). Example: $1,000/month for 20 years at 5% annual (monthly rate = 0.4167%) → PV = $1,000 × [1 − (1.004167)^−240] / 0.004167 ≈ $151,525.

A pension is an employer-funded defined benefit plan that pays a guaranteed income in retirement — typically a percentage of your final salary for life. An annuity is a financial product you can purchase to create a similar income stream, either from an insurer or through retirement accounts. A pension is essentially an annuity paid by your employer; you can also buy a private annuity to supplement or replace pension income. Both involve regular payments, but the funding mechanism and risk allocation differ.