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Note: Due to rounding, the calculations are approximate and intended to be used only as a guide.
This is an interesting annuity calculator. I have included it because it may help you devise a way to build your own retirement annuity, not through an insurance company but through your own skills.
It works differently than many other annuity calculators you see. You don't input the amount you need to have each period. The annuity calculates the annuitized (withdrawal) amount -- which increases each period, thereby offsetting (hopefully) the effects of inflation. However, if you have a variable rate, obviously your withdrawal amount in any given period may actually decrease.
This calculator works by taking the beginning balance, adding the interest for the period and mutiplying that by 1 / (total# of withdrawals-withdrawal# + 1). Therefore, the balance at the end of the term of the annuity will always be $0.
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EXAMPLE CALCULATIONS:
- You have $420,000 that you've invested in a 20 year (80 quarter) annuity. They will pay you 10% interest compounded annually, but paid quarterly. The withdrawal is paid at the end of each quarter and is calculated by multiplying the balance at the end of each quarter by the above formula. So withdrawal #1 is multiplied by 1/80, withdrawal #2 is multiplied by 1/79, etc....
On the calculator you will enter:
- 420,000 for Beginning Balance
- 10 for Interest Rate (compounded annually)
- 20 for Years
- Press the View Schedule button to get a full schedule.
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