If you plan to buy a pension, you should first calculate the present value before buying it. A regular annuity calculator can help you in this task. It is very necessary to understand that in a normal retirement situation, there is a constant cash flow so there is no accumulation of debt. Hence the present value is equal to the expected future sales price or cost. A regular annuity calculator determines the present value by the comparison of actual sales price and the annuity rates.

The present value of any annuity depends upon the rate of inflation and the tenure of payment. The present value of an annuity depends upon the amount that is received in the first year of service and in subsequent years also. In most cases, the first payment received is subject to a variable rate of interest. The present value is less if the sum of the first year’s payments is less than the total number of payments expected in the next year.

Any annuity can be bought from any financial company either through sale or purchase. The purchase option is applicable for variable length contracts. The total cost method is used to buy fixed-length contracts. A purchaser calculates the present values of the premiums using the following Formula: Present value times the rate of return plus sales price divided by the total number of years or tenure. The Formula can be further subdivided into first payment, second payment, third payment, and the remaining payments.

Present value is equal to the difference between the total purchase price and current market value. The total cost is equal to the current market value less the cost of purchasing minus sales charge less the net present value less sales charge. In case of fixed rate annuities, n payments are required for the whole term, whereas for indexed annuities then payments depend on the initial term length. The two terms are usually interchanged because in an indexed plan, the initial term length remains unchanged, while the total cost does not change. However, in some circumstances, the total cost can increase if the initial term is extended.

Annuities provide a reliable and flexible way of building a retirement wealth structure for both senior citizens and their dependents. They are designed to payout a fixed amount of income over a defined period of time. The annuitant receives payments as per the present value of an annuity agreement. Annuity payment rates provide an efficient way of paying the principal, without the risk of premature realization.

Annuity payments are made to beneficiaries nominated by the annuitant. Generally, there are three categories of payments-the annuity-immediate, life annuity and variable annuities-and all these categories differ in payment frequency. Immediate payments terminate when the annuitant reaches his or her death-or at the earliest when he or she ceases to accept the payment into the fund. Life annuities may be paid semi-annually, annually or semiannually. Variable annuities may be paid monthly, annually or semi-annually.