What is the 'Future Value Of An Annuity'
The future value of an annuity is the value of a group of recurring payments at a specified date in the future; these regularly recurring payments are known as an annuity. The future value of an annuity measures how much you would have in the future given a specified rate of return or discount rate. The future cash flows of the annuity grow at the stated discount rate, so a higher discount rate results in a higher future value for the annuity.
BREAKING DOWN 'Future Value Of An Annuity'
Because of the time value of money, cash flows received today are worth more than the same cash flows in the future. The money received today can be invested now and grow over time. By the same logic, receiving $5,000 today is worth more than getting $1,000 per year for five years. The lump sum invested today is worth more at the end of the five years than the incremental investments of $1,000 each, even if they are invested at the exact same interest rate.Ordinary Annuity Present Value Example Calculation
The formula for the future value of an ordinary annuity, as opposed to an annuity due, is as follows:
P = PMT x (((1 + r) ^ n  1) / r)
Where:
P = the future value of an annuity stream
PMT = the dollar amount of each annuity payment
r = the interest rate (also known as the discount rate)
n = the number of periods in which payments will be made
Assume an portfolio manager decides to invest $125,000 per year for the next five years into an investment that he expects to compound at 8% per year. The expected future value of this payment stream using the above formula is:
Future value of annuity = $125,000 x (((1 + 0.08) ^ 5  1) / 0.08) = $733,325
This formula is for the future value of an ordinary annuity where payments are made at the end of the period in question. With an annuity due, the payments are made at the beginning of the period in question. To find the future value of an annuity due, simply multiply the above formula by a factor of (1 + r):
P = PMT x (((1 + r) ^ n  1) / r) x (1 + r)
If the above example was actually an annuity due, its future value would be calculated as:
Future value of annuity due = $125,000 x (((1 + 0.08) ^ 5  1) / 0.08) x (1 + 0.08) = $791,991.

Present Value Of An Annuity
The current value of a set of cash flows in the future, given ... 
Ordinary Annuity
A series of equal payments made at the end of each period over ... 
Delayed Annuity
An annuity in which the first payment is paid at a later date ... 
Annuity Due
An annuity whose payment is to be made immediately, rather than ... 
Annuity
A financial product that pays out a fixed stream of payments ... 
Annuity In Advance
An amount of money that is regularly paid at the beginning of ...

Retirement
How to Calculate the Value of Annuities
Here's everything you need to account for when calculating the present and future value of annuities. 
Retirement
Are Annuities RetirementOnly Investments?
Learn more about why annuities are generally purchased and the way that they can positively and negatively affect an individual preparing for retirement. 
Investing
DIY Annuities: What You Need to Know
Annuities are attractive because they can give you a stream of income, but they can be tricky to buy. 
Retirement
How a Fixed Annuity Works After Retirement
These popular investments can provide a steady stream of income during your retirement years. Here are the details. 
Financial Advisor
Annuities: A Good Option in Turbulent Times?
Annuities can be an enticing option as Americans near retirement, but there are several reasons to be wary of them. 
Investing
Calculating the Present Value of an Annuity
The present value of an annuity is the current, lump sum value of periodic future payments as calculated using a specific rate. 
Investing
What's an Ordinary Annuity?
An ordinary annuity is a series of equal payments made at the end of each period over a fixed amount of time. 
Retirement
Who Benefits From Retirement Annuities
Annuities guarantee some degree of fixed income in retirement. But is the security worth the fees and less favorable tax treatment? How to decide. 
Retirement
Guaranteed Retirement Income In Any Market
By laddering annuities, you can be sure you'll have income no matter what the market does. 
Retirement
5 Mistakes to Avoid When Shopping for Annuities
Annuities give retirees guaranteed income but they aren't all created equal.

How do I calculate the future value of an annuity?
Find out how to calculate the future value of an ordinary annuity or an annuity due, including how the power of compounding ... Read Answer >> 
What exact information is included in the interest rate when calculating the present ...
Find out what the interest rate of an annuity means in the context of the present value calculation, including an explanation ... Read Answer >> 
What is the difference between the present value of an annuity and the future value ...
Find out about the difference between the future value and present value of a fixed annuity, including how to use these calculations ... Read Answer >> 
For what types of financial instruments would I want to calculate the present value ...
Learn about the types of financial instruments the present value of an annuity calculation is most useful for, including ... Read Answer >> 
Why would I need to calculate the present value of an annuity?
Find out what information is needed to calculate the present value of an annuity, including an example of the present value ... Read Answer >>