An annuity is a regular saving vehicle with a payout at the end of the savings period. An annuity will typically have

• Fixed payment size

• Fixed number of payments or intervals making up a savings period

• Fixed interest rate (estimated or guaranteed)

• Predetermined end date

• A payout at the end of the savings period

The application calculates the ultimate expected annuity payout and allows the investor to see the power of compounding interest.

1. the investor see the that a small regular saving builds up a good nest egg

2. the invester see the interest earned on the interest reinvested can gear up the saving significantly

3. the investor can adjust the start and end date and the size of the monthly contribution as well as the expected interest rate to see how that would change their ultimate payout.

The future value calculator is built around the simple Future Value formula that can be expanded to apply to matrices of data.

The R calculation with fixed values

# Input variables
start_date <- Sys.Date()
end_date <- Sys.Date() + years(10)
annual_interest_rate <- 0.06
monthly_payment <- 10000

#Calculations
nMonths <- length(seq(from=start_date, to=end_date, by='month'))
mInt <- annual_interest_rate/12
sumPmt <- monthly_payment*nMonths
futureVal<-(monthly_payment*((1+(mInt/100))^nMonths-1))/(mInt/100)

In the example in the previous page we had

• the start date 2019-03-09 and

• the end date 2029-03-09 with

• an assumed annual interest rate of 0.06 and

• monthly payment of 10,000

The calculated future value that the investor can expect at payout is 1,213,637

Building block for greater things

The annuity calculator is one building block in an application that would empower an investor to do savings and retirement planning.