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Glossary Finance

Annuity

An annuity is a series of equal payments made at regular intervals, such as monthly deposits into savings or monthly income paid out from a lump sum.

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In more detail

The same maths covers both directions: the future value of regular deposits, and the payment a lump sum can support. $500,000 paid out over 25 years at 5% gives $2,922.95 a month. Insurance companies also sell annuity contracts that pay for life.

Try these tools

Annuity Calculator

Project the future value of an annuity's accumulation phase from an optional lump sum, periodic contributions, and an annual growth rate.

Annuity Payout Calculator

Calculate the fixed monthly payout an insurance annuity can generate from a starting balance over a guaranteed fixed term.

See also

  • Glossary Compound interest
    Compound interest is interest calculated on the original amount plus all the interest already added, so growth builds on itself.
  • Guide How Retirement Savings Work
    Regular saving, employer match, fees and inflation, traditional versus Roth, the 25x rule and 4% withdrawal test, annuities.
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