Plain-language meaning
An annuity is a series of equal payments made or received over time. In calculators, the term is often used for repeated deposits, repeated withdrawals or a stream of future payments.
Example
If you contribute 500 each month for 20 years, that payment stream can be projected with a future-value-of-annuity formula. If you receive 1,000 each month from an account, an annuity payout calculation estimates how long the balance may last.
Ordinary annuity vs annuity due
An ordinary annuity assumes each payment happens at the end of the period. An annuity due assumes each payment happens at the beginning, so each payment has one extra period to earn interest.
Limitations
Calculator annuity formulas are simplified. Real annuity products can include fees, surrender charges, tax rules, guarantees, inflation riders and insurer-specific terms. Treat calculator results as estimates, not as product advice.
What to check
- Confirm whether payments happen monthly, annually or on another schedule.
- Check whether payments are made at the beginning or end of each period.
- Separate a mathematical annuity calculation from an insurance or pension product quote.
FAQ
Is an annuity always an insurance product?
No. In math and finance, an annuity can simply mean a series of payments. Some commercial products are also called annuities.
Why does payment timing matter?
A payment made at the beginning of a period has more time to compound than a payment made at the end.