Annuity Future Value
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yrs
The future value of an annuity is the total value at a future date of a series of equal periodic payments invested at a fixed rate. Used to project retirement account balances, savings plan outcomes, and investment portfolio growth.
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Tip: Max out tax-advantaged accounts first (401k, IRA, Roth IRA) before taxable accounts. The tax savings compound alongside your investment returns, dramatically increasing your future value.
- 1FV (ordinary annuity) = PMT × ((1+r)^n − 1) / r
- 2FV (annuity due, paid at start) = FV ordinary × (1+r)
- 3PMT = payment per period, r = periodic rate, n = number of periods
- 4Payments at the beginning of each period (annuity due) earn one extra period of interest
$500/month at 7%/year for 30 years=$566,765Only $180,000 contributed
$1,000/month at 8%/year for 20 years=$589,020Invested $240,000, gained $349k
| Years | 5% return | 7% return | 10% return |
|---|---|---|---|
| 10 | $77,641 | $86,413 | $102,422 |
| 20 | $205,518 | $260,464 | $382,828 |
| 30 | $415,737 | $566,765 | $1,130,243 |
| 40 | $762,567 | $1,309,272 | $3,162,039 |
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Fun Fact
If you invest $500/month from age 25 to 65 at 7%, you accumulate ~$1.3 million. If you wait until 35 and invest the same amount, you get only ~$566k — about half, despite investing only $60k less. This is the cost of starting late.
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