Present Value of Annuity Calculator

A higher discount rate reduces present value because you could grow money faster elsewhere. At 10%, the present value of a 20-year annuity is lower than at 5%.

If lump sum exceeds the present value of annuity payments, take the lump sum. Otherwise, take the annuity. Also consider personal factors.

Yes, lottery winners face lump sum vs annuity choices. Use this calculator to determine which option has higher value.

If payments grow over time (a growing annuity), the present value increases. The growing annuity formula adjusts for this by incorporating a growth rate. Higher growth means higher present value for the same initial payment.

Use the rate of return you could earn on a comparable investment. For risk-free comparisons, use government bond yields. For risky income streams, add a risk premium. A common approach is to use your expected portfolio return.

Use the present value of annuity formula. At a 7% discount rate, the PV of Rs 30,000 monthly for 20 years is approximately Rs 38,80,000. This helps compare a pension offer against a lump sum payout. If offered Rs 40 lakhs lump sum, the pension is slightly more valuable.

For risk-free comparison, use the 10-year government bond yield (currently 7-7.5%). For pensions or guaranteed payments, use a rate close to FD rates (6-8%). For risky payment streams, add 2-4% risk premium. The rate should reflect the return you could earn on a comparable investment.

Longer payment periods increase the present value but each additional year's payment is discounted more heavily. At 8%, Rs 10,000 annual for 20 years has PV of Rs 98,181, while for 30 years it's Rs 1,12,566. The incremental value of extra years diminishes as the period extends.

A growing annuity has payments that increase at a constant rate each period. PV = PMT/(r-g) × [1 - ((1+g)/(1+r))^n]. For Rs 10,000 growing at 5% with 8% discount rate for 20 years, PV is approximately Rs 1,36,800, higher than a non-growing annuity.

Yes, you can work backwards from your desired retirement income. If you need Rs 50,000 monthly for 25 years at 7% returns, the present value needed at retirement is approximately Rs 70,80,000. This is the corpus you need to accumulate by retirement age to fund those withdrawals.