Deferred Fixed Annuity Calculator

It is a contract that gives you a lump sum of money at the end or over a certain period of the contract or on some future date at a deferred interest rate. In Deferred Fixed Annuity you will get the money at the time of your retirement. It is like a certificate of deposit. The interest paid is not less than fixed in the contract.

Deferred Fixed Annuity Formula

The deferred Fixed annuity formula is divided into two-part:

The Future Value of the Annuity Due: FV = P *{( 1+r)n-1}/ r

• Here, FV - is the Final Balance
• P - is the regular payment or the present value
• r - The interest rate in decimal
• n - The number of years unit the accumulation period.

The Present Phase: PV =P * {1-(1+r)-n}/r

• Where,PV - is the present value
• r- the rate of interest in decimal.
• n - number of years

Types of Deferred Annuity

The deferred annuity is basically of three types named:

1. Fixed deferred Annuity
2. Indexed Annuities
3. Variable Annuities

Fixed Deferred Annuities: Theseoffer a guaranteed rate of return on your investment.

Indexed Annuities:These offer you a return on basis of the performance of the market index.

Variable Annuities: In the variable annuities are return on your investment is depend upon the performance of the portfolios of the mutual funds or sub-accounts chosen by the investor.

Difference between Deferred Annuity and Immediate Annuity

The main difference between the deferred annuity and the immediate annuity is as follows:

• An immediate annuity starts the payment of annuity as soon as the buyer makes a lump-sum payment to the insurer.
• In the Deferred Annuity, the payment starts on the future date decided by the buyer.

How to Use Deferred Fixed Annuity Calculator?

Follow the simple procedure over here to know the usage of Online Deferred Fixed Annuity Calculator tool of us. They are along the lines

• For calculating the deferred Fixed Annuity you have to fill the respective values given in the calculator.
• Then, just click on the calculate button.
• Thereafter you will get the desired result.

Deferred Annuity Calculation Examples

Example 1:

Raj was getting 20000 for every 5 years at the interest of rate of 4 %. Find the future value of the annuity at the end of the 5 years by the fixed annuity deferred formula?

Solution:

In this question, we have to find the Future value of annuity =?

The present value deposited every year is given in the question,

The rate of interest is given

And the period is given,

Then,

Future Value,

(FV) = P {(1+r)n-1}/r

Put the given values in the formula,

FV = 20,000 * {(1+ 4)^ 5 - 1}/4

FV= 20,000* { 5^5 - 1 }/4

FV = 20,000 * (3125-1)/4

FV = 20,000 * (781)

FV = 1,56,20,000.

Example 2:

If the present value of the annuity is 10,000 and the rate of interest is 0.5% then find the payment value of each payment every month for 10 years?

Solution:

The values given are,

The Present value at which the annuity is calculated,

Rate of interest, and

The period,

Then the payment value =?

PV = P * {( 1- (1+r)-n}/ r

PV = 10000 {(1 - (1+r)^-n}/r

PV = 10000 {(1- (1+0.5)-10}/ 0.5

• Number of years changed into months = 10* 12= 120 months
• And r% = 0.5% = .005

PV= 10000 * (0.005 / 1- (1.005-120))

PV = 10000 * (0.005/(1- 0.54963))

PV= 10000 * (0.011)

PV = 110 Rs.

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FAQs on Deferred Fixed Annuity Calculator with Steps

1. What is the use of the Deferred Fixed Annuity formula?

The deferred fixed annuity formula is used to calculate the annuity given in the future on the specific rate of interest over a certain period.

2. How is the rate of interest in Deferred Fixed Annuity calculated?

At Deferred Fixed Annuity the rate of interest is locked for an initial period and then the rate of interest is adjusted each year. In Fixed Annuity, you will get the annuity on a minimum interest rate not less than that.

3. What is the safest Deferred Annuity?

Deferred Fixed Annuities are the safest or less risky annuities as you will get a minimum fixed annuity over a certain period whatever ups and downs happen in the market.

4. What is the formula for the future value of Fixed Deferred Annuity?

The formula for fixed deferred annuity is (FV) = P {(1+r)n-1}/r

• Where FV= Future Value
• P= Present Value
• r = The rate of interest.
• n = number of years.