If you're shopping around for annuity investments, you'll find that each states its rate of return, leaving you no need to calculate rates manually. But you can calculate your target return rate on an annuity to reach a desired level of savings. If you find that no annuities offer your calculated rate of return, you may have to revise your expectations and seek a more modest savings goal.
Type the amount that you will deposit each year into a financial calculator, and then press "PMT." If you do not have a physical financial calculator, use an online one (see "Resources").
Type the number of years until you start withdrawing from the annuity into the calculator, and then press "n."
Type your target savings level into the calculator and then press "FV."
Type "0" and then press "PV" to represent the annuity's balance before you make any deposits.
Press "Compute" and press "i" to find the annuity';s rate of return. For example, if you deposit $4,000 each year for 20 years and hope to save $300,000, you'll see that you need a rate of return of 12.3 percent.
Items you will need
- Financial calculator
- Jupiterimages/Photos.com/Getty Images
- How Much Should I Have in a Nest Egg?
- How to Calculate Expected Return Using Excel
- How Long Should a Checking Account Statement Be Kept?
- How to Calculate Monthly Return Volatility for a Stock
- How to Calculate a Change in Return on Equity
- How to Calculate the Return on an Investment with Recurring Expenses
- How to Calculate Downside Deviation
- Yield to Maturity Vs. Spot Rate
- Should Dividends Be Ignored When Calculating Return on Assets?
- How to Calculate Equity Return