Annuity vs. Perpetuity: What’s the Difference?

Shawn Plummer

CEO, The Annuity Expert

Annuity Vs. Perpetuity.


CriteriaAnnuityPerpetuity
DefinitionA series of equal payments made at regular intervals for a specific period.A series of equal payments made at regular intervals indefinitely.
DurationFixed (e.g., 10 years, 20 years)Infinite (goes on forever)
Payment AmountFixed (e.g., $1000 every year)Fixed (e.g., $500 every year)
Present ValueCalculated using the formula for annuities.Calculated using the formula: PV = PMT / r (where r is the discount rate)
Future ValueCan be calculated given the interest rate and time period.Infinite, as it never ends.
Usage ExampleRetirement funds, loan payments.Endowments, certain types of stocks or bonds.
End DateHas a specified end date after which payments stop.No end date; payments continue indefinitely.

What’s the Difference Between Annuity and Perpetuity?

An annuity is a financial product that provides guaranteed income for a specific period of time. On the other hand, perpetuity is an investment that pays out indefinitely. The critical difference between the two is the length of time they provide income.

Annuity Vs. Perpetuity

Annuities

Annuities are ideal for people who want to ensure that they have a steady income stream for a specific period of time. For example, an annuity can be a good option if you are retired and want to ensure that you have enough money to cover your living expenses.

Annuities And Perpetuities

Perpetuity

On the other hand, Perpetuities can be a good choice for people who want to leave an inheritance or create a legacy. If you have a large sum of money you want to invest long-term, perpetuity can be good.

Perpetuity

Next Steps

So, which is right for you? The answer depends on your specific financial goals and needs. We recommend talking to a financial advisor if you are unsure which option is best for you. They can help you evaluate your options and make the best decision for your unique situation.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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