Written By : Kim Borwick
Financially Reviewed By : Thomas J. Brock, CFA, CPA
This page features 5 Cited Research Articles
Fact-Checked

Annuity.org partners with outside experts to ensure we are providing accurate financial content.

These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.

Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.

Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.

An annuity table is a tool that simplifies the calculation of the present value of an annuity. Also referred to as a “present value table,” an annuity table contains the present value interest factor of an annuity (PVIFA), which you then multiply by your recurring payment amount to get the present value of your annuity.

There are many reasons you might want to know the present value of your annuity. Chief among them is the ability to tailor your financial plan to your current financial status. The present value of your annuity is a component of your net worth, and you need this information to ensure a comprehensive picture of your finances.

Just as you regularly review your credit card statements, bank balances and investments, you’ll want to know the value of your annuity at any given point in time. As any expert in financial literacy will attest, your balance sheet is the foundation for everything from your budget to your retirement savings.

So, how do you use an annuity table to calculate the present value of an annuity?

First, you need to know whether you receive your payments at the end of the period — as is the case with an ordinary annuity — or at the beginning of the period. When payments are distributed at the beginning of a period, the annuity is referred to as an annuity due. Annuity due payments typically apply to expenses such as rent or car leases where payments are made on the first of the month.

Because most fixed annuity contracts distribute payments at the end of the period, we’ve used ordinary annuity present value calculations for our examples.

You also need your payment amount and your discount rate. If you don’t know them off-hand, you can find them in your contract.

Present value tables aren’t as precise as manual calculations or financial software programs because the tables contain a limited set of interest rates and payments. If you take a look at a variety of ordinary annuity tables, you’ll see the factors are all within a decimal place, depending on whether they are rounded. Additionally, you can use them only with fixed payment amounts and interest rates.

If this sounds confusing, keep reading. It’s not as complicated as it appears.

What Is an Annuity Table?

An annuity table, or present value table, is simply a tool to help you calculate the present value of your annuity.

Based on the time value of money, the present value of your annuity is not equal to the accumulated value of the contract. This is because the payments you are scheduled to receive at a future date are actually worth less than the same amount in your bank account today.

The time value of money states that a dollar today is worth more than it will be at any point in the future. It makes sense when you consider that every dollar has earning potential because it can be invested with the expectation of a return. So, if you have $1,000 right now, and you put it in a high-yield savings account with a 1 percent annual percentage yield (APY), at the end of a year, you will have $1,010.

Conversely, if I hand you $1,000 in cash at the end of the year, you will have $1,000. So, essentially, the $1,000 I give you 365 days from now is worth only $990 to you because you’ve missed the opportunity to invest it and earn the 1 percent compound interest.

This example is an easy calculation because we’re dealing with simple round numbers and only one payment period. But when you’re calculating multiple payments over time, it can get a bit more complicated.

That’s where an annuity table comes in handy.

What Are the Benefits of Using an Annuity Table?

Although annuity tables are not as precise as annuity calculators or spreadsheets, the benefit of using an annuity table is the ease of calculating the present value of your annuity.

When the payments are fixed, the present value interest factor of an annuity (PVIFA) — these are the values that correspond to the intersection of the number of payments remaining and the interest rate — can be simplified.

Helpful Hint:
It might help to think about using an annuity table in the same way you used multiplication tables in elementary school.

An annuity table provides you with the PVIFA by which you will multiply your payment amount to arrive at your annuity’s present value, thus eliminating the need for you to work out the most complicated step in the present value formula.

Present Value of an Annuity Formula

The formula for finding the present value of an ordinary annuity is often presented one of two ways, where “r” represents the interest rate and “n” represents the number of periods.

Using either of the two formulas below will provide you with the same result.

The formula for finding the present value of an annuity
Expand

In the PVOA formula, the present value interest factor of an annuity is the part of the equation that is written as formula for finding the present value of an annuity and multiplied by the payment amount. Therefore, if you consult an annuity table, you can easily find the PVIFA by identifying the intersection of the number of payments (n) on the vertical axis and the interest rate (r) on the horizontal axis.

Present Value of an Annuity Table

Annuity tables can be helpful for finding the present value of an annuity because they do the mathematical legwork for you.

Below is an example of an annuity table for an ordinary annuity. Remember that all annuity tables contain the same PVIFA factor for a given number of periods at a given rate, just like all times tables contain the same product for any two given numbers. Any variations you find among present value tables for ordinary annuities are due to rounding.

n1% 2% 3% 4% 5%6%
10.9901 0.98040.97090.96150.95240.9434
2 1.9704 1.9416 1.9135 1.8861 1.85941.8334
3 2.9410 2.8839 2.82862.7751 2.72332.6730
43.90203.80773.71713.62993.54603.4651
5 4.85344.71354.57974.4518 4.32954.2124
65.79555.60145.41725.24215.07574.9173
76.72826.47206.23036.00215.78645.5824
87.65177.32557.01976.73276.46326.2098
98.56608.16227.78617.43537.10786.8017
109.47138.98268.53028.11097.72177.3601
1513.865112.849311.938011.118410.37979.7123
2018.045616.351414.877513.590312.462211.4699
25 22.0232 19.523517.413215.622114.0939 12.7834

Other Methods for Calculating the Present Value of an Annuity

There are other methods for calculating the present value of an annuity. Each has a different level of effort and required mathematical skill.

These methods for calculating the present value of an annuity are often more precise than the preset annuity table:
  • Annuity calculator
  • Excel spreadsheet
  • Manual Formula

For example, using Excel, you can find the present value of an annuity with values that fall outside the range of those included in an annuity table.

Perhaps you own a fixed annuity that pays a set amount of $10,000 every year. The terms of your contract state that you will hold the annuity for 7 years at a guaranteed effective interest rate of 3.25 percent. You’ve owned the annuity for five years and now have two annual payments left. You can find the exact present value of your remaining payments by using Excel.

Calculating the present value of an annuity in a spreadsheet
Expand

Depending upon the numbers you’re working with and how accurate you want to be, an annuity table is a simple and convenient way to calculate the present value of an ordinary annuity.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: May 13, 2021

5 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Averkamp, H. (n.d.). Present Value of an Ordinary Annuity. Retrieved from https://www.accountingcoach.com/present-value-of-an-ordinary-annuity/explanation/3
  2. Khan Academy. (n.d.).The money market model. Retrieved from https://www.khanacademy.org/economics-finance-domain/ap-macroeconomics/ap-macro-resources-and-exam-preparation/every-graph-used-in-ap-macroeconomics/a/the-production-possibilities-curve
  3. Property Metrics. (2019, July 23). Understanding Present Value Formulas. Retrieved from https://propertymetrics.com/blog/present-value-formulas/
  4. SparkNotes. (nd.). Quantity Theory of Money. Retrieved from https://www.sparknotes.com/economics/macro/money/section2/page/2/
  5. Study Finance. (n.d.).Present Value Interest Factor of Annuity. Retrieved from https://studyfinance.com/present-value-interest-factor-of-annuity/#3-present-value-annuity-factor-table