Annuity Payout Calculator Schwab

Annuity Payout Formula:

\[ PMT = PV \times \frac{r}{1 - (1 + r)^{-n}} \]

Periodic Payment (PMT):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the Annuity Payout Formula?

The annuity payout formula calculates the periodic payment amount for an ordinary annuity based on present value, interest rate, and number of periods. This is commonly used for retirement planning and fixed annuity products.

2. How Does the Calculator Work?

The calculator uses the annuity payout formula:

\[ PMT = PV \times \frac{r}{1 - (1 + r)^{-n}} \]

Where:

\( PMT \) — Periodic payment amount (USD)
\( PV \) — Present value or principal amount (USD)
\( r \) — Interest rate per period (decimal)
\( n \) — Number of periods (unitless)

Explanation: The formula accounts for the time value of money, calculating equal payments that would fully amortize the principal over the specified periods at the given interest rate.

3. Importance of Annuity Calculations

Details: Accurate annuity calculations are crucial for retirement planning, loan amortization, and understanding fixed income products. They help determine sustainable withdrawal rates from retirement accounts.

4. Using the Calculator

Tips: Enter present value in USD, interest rate as a decimal (e.g., 5% = 0.05), and number of periods. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between ordinary annuity and annuity due?
A: Ordinary annuity payments are made at the end of each period, while annuity due payments are made at the beginning. This calculator assumes ordinary annuity.

Q2: How does compounding frequency affect results?
A: The rate (r) should match the payment frequency. For monthly payments with annual rate, divide rate by 12 and multiply periods by 12.

Q3: What are typical Schwab annuity rates?
A: Rates vary by product and market conditions. Check current Schwab annuity offerings for accurate rates.

Q4: Can this be used for mortgage calculations?
A: Yes, the same formula applies to fixed-rate mortgage payments where PV is loan amount.

Q5: How does inflation affect annuity payouts?
A: This calculates nominal payments. For real (inflation-adjusted) payments, use a real interest rate (nominal rate minus inflation).