# Future Value Annuity Calculator

## Calculating Retirement Savings Targets

This calculator is designed to provide the user with a view of the future value of a retirement fund and three annuities that could be financed with this money. The calculator requires a total of four inputs:

• The current funds in the retirement account
• The annual payments to be made to the account
• The number of years over which the account will be funded with the annual payment
• The annual rate of interest earned on the funds in the retirement account

Using this information, the calculator then provides the user with the following:

• The future value of the funds in the retirement account
• The potential 20-, 25- and 30-year annuities that could be derived from the future value of the funds at the given annual rate of interest on those funds

### Retirement Income and Annuities

Annuities can play a key role in retirement planning for several reasons. They provide a reliable source of income since they are designed to make regular payments over a specified period, which can also be the remainder of the annuitant’s life. They also provide the retiree with a more diverse set of investments. Annuities are classified as an insurance product, and as such, they behave differently than stocks and bonds during economic downturns.

Annuities can also alleviate the fear retirees have of outliving their savings. Lifetime annuities can do this by offering this longevity protection, although this feature does come at a cost. Annuities can also be customized to the retiree’s goals as well as their risk tolerance. Like other investments, the advantages annuities have to offer retirees do come with some disadvantages too. For example, they are often loaded with fees and provide limited liquidity if an emergency arises.

### Interpreting the Results of Our Calculator

The results of this calculator are split into two sections. The first section includes the future value of the retirement funds. This value grows all new and existing funds by the annual interest rate. The calculator also assumes the annual payment into the annuity fund remains constant over the number of years specified in the payment period.

The second section of the calculator provides a forecast of the annual income that can be derived from the funds in the retirement account. This calculator provides results for 20-, 25- and 30-year periods over which the account owner would receive income from the annuity. It’s important to understand that these results are not reflective of what the investor might find in the annuity marketplace, rather the calculator assumes the retiree will draw down funds from the account as if it were an annuity.