Calculating Your Return On Investment With An Annuity Payment CalculatorIs the annuity you are considering a good buy or a bad buy?With the competition today for baby boomer's dollars you will want to have done your home work before you invest your savings in an annuity. Simply speaking a company, usually and insurance company, will take your money and promise to pay you a fixed or variable amount each month for the rest of your life. Your job is to decide if the amount of money paid back will give you and adequate return on your money. Most of us have the software already installed on our computer to create an annuity payment calculator. With a few simple formulas and a Microsoft Excel spreadsheet you will be able of calculate your rate of return in minutes. Open you spread sheet and in row 1 column A, type in Premium. In row 2 column A type in Mo. Payment. In Row 3 column A type in period of years. In Row 4 column A type in Monthly Rate and finally in Row 5 column A type in Annual Interest Rate. Two formulas are required. In Row 4, column B the formula is =RATE((b3*12),B2,-B1). Your spread sheet should look something like this: A B 1 Premium 2 Mo. Payment 3 Period In Years 4 Monthly Rate 5 Annual Interest Rate Your annuity payment calculator is complete. If you are offered an annuity that will pay you $600 a month for the rest of your life and the the premium is $100,000.00, you would enter those figures in your spreadsheet in columns B2 and B1 respectfully. The number of payments will depend on how long you live. Since few of us know that figure use the years from an actuarial table to to give a best estimate for your life expectancy. For the purpose of this discussion we will use 20 years. Entering his data into your spread sheet you should come up with the following values: A B 1 Premium $100,000 2 Mo. Payment $600 3 Period In Years 20 4 Monthly Rate 0.32% 5 Annual Interest Rate 3.96% B4 is your monthly interest rate on your investment. B5 has converted the monthly rate to a compounded annual rate. With this figure you are equipped to compare the various annuity offers with other instruments such as CDs, money market funds or bonds. If the Excel worksheet is not for you, you could consider purchasing a TI 83 calculator. It has a financial function built in that can be used to enter and get the same data. It is portable and with a little practise easy to use. If all else fails, you can always ask the salesman to use his annuity payment calculator to get the comparison figures. Invest wisely and you may have what you need to payoff that sailboat and still live to enjoy it. Invest poorly and your golden years will be tarnished. |