There are two popular and entirely different purposes to calculate present value of annuities.
1) *Calculating retirement funding needs. Suppose you are planning to retire next month and want to purchase a fixed annuity with guaranteed interest rate of 3% that will immediately start providing you with $25,000 of annual retirement income over the next 25 years. Being able to calculate present value of annuities helps you see the lump sum you will need to pay for your annuity (in this case, approx $435,330).
1) *Calculating loan payments. Using the same example in reverse, let's say you had a $435,330 mortgage at 3% and you wanted to pay it off in 25 years. Purchasing an annuity for that amount would allow you to make payments of $25,000 per year for the next 25 years.
*Both of these are overly simplistic examples. Talk to a licensed agent versed in annuities for specific annuity details.
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1) *Calculating retirement funding needs. Suppose you are planning to retire next month and want to purchase a fixed annuity with guaranteed interest rate of 3% that will immediately start providing you with $25,000 of annual retirement income over the next 25 years. Being able to calculate present value of annuities helps you see the lump sum you will need to pay for your annuity (in this case, approx $435,330).
1) *Calculating loan payments. Using the same example in reverse, let's say you had a $435,330 mortgage at 3% and you wanted to pay it off in 25 years. Purchasing an annuity for that amount would allow you to make payments of $25,000 per year for the next 25 years.
*Both of these are overly simplistic examples. Talk to a licensed agent versed in annuities for specific annuity details.