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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.

Table of Contents

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What is an Annuity Calculator?

Annuity Calculator is an online tool that evaluates the 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 the 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 payments is a projected activity using a calculator. This calculator also 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]

Where,

  • 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]

Where,

  • P - Future value of an annuity
  • PMT - Value of every annuity payment
  • r - Rate of interest
  • n - Number of periods for which one will make a 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 Online?

Interested individuals can calculate annuity using an online calculator to save time and effort. They must follow the steps mentioned below to calculate an annual payout amount -

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Step 1

Enter the starting principal.

Step 2

Input details regarding return rate.

Step 3

Type in the number of years to payout.

Example of Annuity Calculation

Let’s understand the annuity calculation 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
  • The 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 -

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.

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.

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.

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.

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.

Expected Return Rate

Based on the type of annuity you choose, the rate of return may be fixed or variable. A fixed return rate signifies stable and guaranteed returns, whereas variable rates are market-linked and, therefore, volatile.

By considering the aforementioned factors, calculating annuity might be convenient for first-time investors. Further, they can consider going through this piece for a detailed description of an online annuity calculator.

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FAQs about Annuity Calculator