What Is The Growing Annuity?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is a Growing Annuity?

A growing annuity is a series of cash flows that grow at a consistent rate for a finite number of periods. It’s a type of financial product often used in retirement planning or investment calculations.

Growing Annuity

How Does a Growing Annuity Work?

  1. Initial Payment: It begins with an initial payment.
  2. Growth Rate: Each subsequent payment increases by a fixed percentage, known as the growth rate.
  3. Duration: This continues for a set number of periods.

Examples of Growing Annuity

  1. Retirement Income: An annuity starting at $20,000 annually, growing at 3% per year for 20 years.
  2. Investment Payments: Investing $10,000 yearly into a fund, increasing the investment by 5% each year for 15 years.
 Growing Annuity Formula

Calculating the Future Value of a Growing Annuity

The formula for calculating the future value (FV) of a growing annuity is:



  • P=Future value of an annuity stream
  • PMT=Dollar amount of each annuity payment
  • r=Interest rate (also known as discount rate)
  • n=Number of periods in which payments will be made​
 Present Value Of A Growing Annuity

Sample Growing Annuity Calculations

Initial PaymentGrowth RateDuration (Years)Interest RateFuture Value
Pv Growing Annuity


A growing annuity is a financial tool that can be pivotal for long-term financial planning, particularly in scenarios like retirement income or consistent investment growth. Understanding how it works and how to calculate its future value is essential for effective financial management.

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What is the PV of my annuity?

An annuity’s present value (PV) is the amount of money you must invest today to generate a steady stream of income payments over time.

Am I taxed on the PV of my annuity or the annuity payments?

The taxes depend on the type of annuity that you have purchased. With a qualified annuity, you are taxed only when you receive payments from the annuity. With a non-qualified annuity, you must pay income tax on the principal and any investment earnings from when they are paid. If you withdraw before age 59 1/2, you may also be subject to an additional 10% tax penalty. It is essential to consult a qualified financial advisor or tax expert when considering taxes associated with annuities.

What factors determine the PV of my annuity?

The present value of an annuity depends on several factors, including the amount of your payments, the frequency of your payments (monthly or yearly), the rate of return on your investments, the length of time that you will receive payments, and any fees associated with the annuity. All of these factors should be considered when determining the present value of your annuity.

How do I determine the PV of my annuity if it is tied to a market index like the S&P 500?

If your annuity is linked to a stock index such as the S&P 500, you must consider the index’s performance and any associated fees. It would be best to consider how long you will receive payments from the annuity and what rate of return you can expect on your investments. Generally speaking, the longer you plan to receive payments, the higher the present value of your annuity will be.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, 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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