A lottery winner gets two envelopes: $1 million in cash today, or $60,000 every year for 25 years. Which is richer? The answer is not obvious until you account for interest compounding on each payment over time. An annuity is simply a stream of equal payments made at regular intervals, and this calculator tells you what that stream is worth -- both as a lump sum today and as a pile of cash at the end.

The math combines two ideas. First, the present value of every future payment, discounted back at your annual interest rate. Second, the future value of those payments if each one keeps earning interest until the last period. Payments made at the beginning of each period (annuity due) are worth a touch more than payments at the end (ordinary annuity), because each dollar starts compounding one period sooner. The Annuity Type field lets you compare both.

Say a retiree in Arizona rolls $100,000 from a 401(k) into an annuity paying $1,000 a month for 10 years at 5 percent. The tool shows the future value, the total of all payments, and how much of the pile is pure interest. That breakdown settles the envelope question for good: you can see exactly what the payment stream costs the issuer and what it delivers to you.

With the pre-filled defaults — Variable A 10, Variable B 5 — the Annuity Calculator returns Result 50.0000. Change any input and those results update instantly, so you can see exactly how each number you enter moves the answer.