Money paid later is worth less than money today. The present value lets you compare a stream of payments with a lump sum offer – if the lump sum is higher than the PV at your discount rate, take it.
How to use the Present Value of Annuity Calculator
- Payment per period
- Annual interest rate
- Number of years
- Payment frequency
- Compounding frequency
- Payments made at
- Growth of payments per year
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the payment, discount rate, number of years, payment frequency, compounding, timing and growth.
Tips
- Start early – time does more of the work than the amount you save.
- Take the full employer match if your plan offers one.
- Plan with a cautious return (4–6% after inflation) and check again every year.
- Know the contribution limits and required minimum distribution rules for your accounts.
Common mistakes to avoid
- Ignoring inflation when setting a retirement target.
- Underestimating how long retirement can last.
- Withdrawing early and paying penalties and taxes.
Inputs explained
| Field | What to enter |
|---|---|
| Payment per period | Amount in your currency |
| Annual interest rate | In % |
| Number of years | Units: years, months |
| Payment frequency | Choose one: Monthly, Semi-monthly, Bi-weekly, Weekly … |
| Compounding frequency | Choose one: Yearly, Semi-annually, Quarterly, Monthly … |
| Payments made at | Choose one: End of each period, Beginning of each period |
| Growth of payments per year | In % |
What each result means
- Number of payments = round([Number of years]×[Payment frequency])
- Present value = gpv([Rate per payment period], [Number of payments], [Payment per period], [Payment growth per period], [Payments made at])
- Discount (time value of money) = [Total payments] – [Present value]
Example values
How the main result changes when Payment per period changes and everything else stays at the example values above:
| Payment per period | Present value |
|---|---|
| 500 | 75,762.66 |
| 750 | 113,643.98 |
| 1,000 | 151,525.31 |
| 1,250 | 189,406.64 |
| 1,500 | 227,287.97 |
| 2,000 | 303,050.63 |
Formula
PV = P × (1 − (1 + i)^−n) ÷ i × (1 + i × timing)Growing: PV = P × (1 − ((1 + g) ÷ (1 + i))^n) ÷ (i − g) × (1 + i × timing)Worked example
Inputs — Payment per period: $1,000; Annual interest rate: 5 %; Number of years: 20 years; Payment frequency: Monthly; Compounding frequency: Monthly; Payments made at: End of each period; Growth of payments per year: 0 %.
Results — Number of payments = 240; Present value = $151,525.31; Total payments = $240,000.00; Discount (time value of money) = $88,474.69.
Frequently asked questions
What is the present value of an annuity?
Today's value of a series of future payments.
Which discount rate should I use?
Your expected investment return or the rate on similar-risk assets.
Is a lump sum better than an annuity?
If the lump sum exceeds the annuity's present value at your rate.
What formula does the Present Value of Annuity Calculator use?
PV = P × (1 − (1 + i)^−n) ÷ i × (1 + i × timing).