General
Everything about Calculating Annuity Value Online in India
One of the convenient ways to finance daily expenses after retirement is by investing in annuities. The investment amount in annuities is dependent on a number of factors, including market volatility. Considering this, choosing the right investment amount for maximum benefits is paramount.
In this regard, calculating annuity value using an online calculator will help you determine the required annuity amount after retirement effortlessly. By finding out this value, one can achieve the desired accumulated amount at the end of tenure.
To know everything about an annuity calculator, you might refer to this piece.
What Is an Annuity Calculator?
This is an online tool that evaluates an annuity amount individuals will receive after retirement. Using this calculator, investors estimate the investment they need to make during the accumulation phase to receive maximum returns at the end of investment tenure.
Furthermore, this calculator also fetches information regarding your annual or monthly payout as per the plan. As the future market projections cannot be determined beforehand, calculating annuity payment is a projected activity using a calculator. This calculator also s computes return values from annuity plans.
Let’s learn more about the working of such a calculator.
How Does an Annuity Plan Calculator Work?
An annuity calculator functions with the following formula -
PV = C x [{1-(1+r)^-n}/r]
The following table will give you an insight into the meaning of each term -
|
Symbols |
Meaning |
|
PV |
Present Value |
|
C |
Cash flow per period |
|
r |
Interest rate |
|
n |
Number of periods |
Furthermore, to find out the future value of an annuity, the calculator works on the following formula:
P = PMT x [{(1+r)^n-1)}/r]
Here is a table showing the representation of all the variables -
|
Variables |
Representation of the Variables |
|
P |
Future value of an annuity |
|
PMT |
Value of every annuity payment |
|
r |
Rate of interest |
|
n |
Number of periods on which one will make payment |
Calculating the present and future values of annuity manually by using the above formulas can be complex and time-consuming. To that end, an annuity calculator can simplify the calculations and fetch necessary details in a short span.
How to Calculate Annuity by Using an Online Calculator?
Interested individuals can calculate annuity using an online calculator to save their time and effort. They must follow the steps mentioned below to calculate an annual payout amount -
- Step 1: Enter the starting principal.
- Step 2: Input details regarding return rate.
- Step 3: Type in the number of years to payout.
After submitting the aforementioned values, the calculator will fetch details of the annual payout amount.
Let’s understand this with the help of an example.
|
Variables |
Values |
|
Principal |
₹50,000 |
|
Return rate |
6% |
|
Years to payout |
10 years |
After entering the aforementioned values, the calculator finds out the annual payout amount to be ₹6,408.8.
What Are the Results of an Annuity Payout Calculator?
While calculating annuity using an online calculator, one can expect the following results -
- Overall retirement amount
- Future value of savings
- Additional savings
- Number of years at which the investment will generate returns at a specified rate
Apart from knowing the above details, you should also know how to use an annuity calculator in India.
However, before using a monthly annuity calculator in India, one must factor in certain considerations.
Which Factors Determine the Future Value of an Annuity Calculator?
Here are the factors you should consider before calculating annuity by using a calculator -
1. Income Information
Having proper income details will allow you to set savings targets for the present and future in a realistic manner. Thus, you should be aware of annual income, rate of income growth etc., as it will help you estimate how much income you can obtain in the future depending on which you can invest effortlessly.
2. Demography Details
One must consider the current age and expected retirement age before using an online calculator. This information helps in determining the extent of an accumulation phase in an annuity plan. For instance, an individual subscribing at an early age can stay invested for a longer time. This will maximise their benefits with the power of compounding and accumulate a substantial corpus for retirement.
3. Present Savings
It is imperative that a retirement savings plan should be separate from other plans. In this context, you can invest in a number of financial instruments. However, it is vital you calculate your risk appetite and estimated returns beforehand so that you can calculate the investment amount for an annuity plan.
4. Expenses
Your savings plan will also depend on the current expenses you make. Due to inflation, future expenses will only increase. Therefore, you should factor in this point while using an online calculator.
5. Rate of Inflation
To create a large retirement corpus, you should consider saving more. However, this might be difficult given the high rate of inflation in India. Not only do the expenses go up, but the returns generated seem less valuable over time. Thus, you must consider this factor while calculating the future value of an annuity.
6. Expected Return Rate
Based on the type of annuity you choose, the rate of returns may be fixed or variable. A fixed return rate signifies stable and guaranteed returns, whereas variable rates are market-linked and, therefore, volatile.