When you are buying an annuity, it always helps to know approximately how much you will be getting before you actually purchase and sign the contract. This is where an annuity calculator comes in.
An annuity calculator is an application that is either web-based or something you can download easily from the Internet. More often than not, any broker you approach to purchase an annuity will have one as well.
How a Calculator for Annuities Works
A calculator used for annuities factors in a number of variables such as:
• The annual interest rate for the annuity
• The number of years that the annuity will be paid off
• The number of pay periods in every year
• The interest rate applied for every pay period
• The total number of pay periods in the entire duration of the annuity The calculator makes use of a specific mathematical formula for computing this type of investment. The formula in turn is based on financial principles on the effect of time Age calculator on the value of money. The formula can be modified depending on the type of annuity for which it is used. For example, the formula used for computing fixed annuities is slightly changed when used for calculating variable annuities and indexed annuities.
Using an Annuity Calculator
You can make your own computations on how much you will get for a specific investment simply by using an annuity calculator that is readily available online. When you use such a calculator, you must make sure that you factor in your own needs and requirements so you can get an accurate figure of how much you can expect to get when you start receiving payments from your investment.
Among the factors that you should consider when computing these possible payments are:
1. Your age. The size of your payments is dependent on the length of your life expectancy. So, the older you are when you first buy the investment, the bigger amount you can get every pay period because your life expectancy is shorter.
2. Your health. If you’re approaching retirement age with certain impairments to your health, you can expect to get bigger payments, again because of your shortened life expectancy.
3. Naming beneficiaries. You have the option to assign beneficiaries when you buy an annuity. But if you choose to have your spouse or heirs enjoy your investment after you die, you should expect smaller payments every pay period.
An annuity calculator is a great tool that you must access and utilize before you buy an annuity. It will help you determine whether you are making a sound financial decision for your future.