Buy a Pension: How to calculate the future value of an annuity?

Online, January 27, 2010 (Newswire.com) - Overland Park, Ks January 26-2009

Calculating Annuity: When Your Financial Future is on the Line

Many people reaching retirement age consider purchasing an immediate payment annuity. These are annuities where money is invested in an upfront lump-sum purchase with a specific payment plan that is payable immediately. The immediate payment of the annuity provides retirees with cash flow right away, making immediate payment annuities a favorite of investors that have just begun their retirement.

What is an annuity? An annuity is a series of equal value payments over a given period of time. Some common examples of annuities include house payments, car payments and retirement income. This is because, regardless of whether a person is paying out or receiving payment, equal payments are being paid, by someone, over a period of time.

An income annuity, however, is where money is invested upfront and future payments with interest are paid back to the investor. The payments to the investor are always a predetermined amount and are exactly the same amount each month. This makes income annuities an easy investment for which to budget, because there are guaranteed cash inflows back to the investor.

The time value of money is an important consideration when choosing an annuity. Due to inflation, and interest earned from an annuity over time, a dollar today is not worth the same amount as a dollar tomorrow. You want to make sure your investment is worthwhile. This is where calculating the future value of an annuity comes in handy.

For example, the equation for future value of an annuity with three regular annuity payouts of $10 and an interest rate of 9 percent, would look like this:

10 + 10(1.09) + 10(1.09)2 = 32.78

The future value of the annuity payments, $32.78, minus the principal investment in the annuity, $30, equals $2.78, or the annuity income.

Fortunately, you don't have to be a mathematician to choose a payment annuity, or calculate the annuity income. An online annuity calculator can do the math for you. To find out more about the future value of an annuity and access annuity calculations, videos, information and resources visit: www.buyapension.com.

About BuyAPension.com
BuyAPension.com was formed in 2008 as an annuity company to serve the ever-expanding retirement income needs of Baby Boomers and their parents. Planning for income in retirement presents many challenges and investment products are often complex, therefore, it is our goal to provide simple solutions and explain these solutions to our clients in a straightforward, understandable fashion.

For more information, visit our website at www.BuyAPension.com. You can also reach us by mail at College & Metcalf Plaza,7027 West 110th St., Overland Park, Kansas 66210, or by phone at 1-877-651-4626.