📈 Growing Annuity Calculator
Calculate growing annuity future and present value
First payment amount (payments grow each period)
Rate at which payments increase each period
Must be greater than growth rate
How to Use This Calculator
Enter Initial Payment
Input the initial payment amount - the first payment in the series. Subsequent payments will grow by the growth rate.
Enter Growth Rate
Enter the growth rate per period - the percentage by which each payment increases over the previous payment (e.g., 3% for 3% growth each period).
Enter Interest Rate and Periods
Enter the interest rate per period (must be greater than growth rate) and the number of periods. The interest rate is used to discount or compound the growing payments.
Review Growing Annuity Values
See the future value and present value of the growing annuity, along with total payments made. This accounts for both the payment growth and interest.
Formula
Future Value = PMT × [((1 + r)^n - (1 + g)^n) / (r - g)]
Present Value = PMT × [1 - ((1 + g)/(1 + r))^n] / (r - g)
Where:
• PMT = Initial payment amount
• g = Growth rate per period
• r = Interest rate per period
• n = Number of periods
• Note: r must be greater than g
Example Calculation:
If initial payment $1,000, growth rate 3%, interest rate 5%, 10 periods:
• Payment 1: $1,000
• Payment 2: $1,030 (grows 3%)
• Payment 10: ~$1,304
• Future Value: ~$13,207
• Present Value: ~$8,107
About Growing Annuity Calculator
A growing annuity calculator helps you calculate the future value and present value of annuities where payments grow at a constant rate each period. Unlike regular annuities with fixed payments, growing annuities have payments that increase by a fixed percentage each period (e.g., 3% growth per year). This is common in retirement planning, salary increases, dividend growth, and other scenarios where payments increase over time. This calculator accounts for both the payment growth and the interest rate.
When to Use This Calculator
- Retirement Planning: Calculate savings with increasing contributions
- Salary Growth: Model payments that grow with inflation or raises
- Dividend Growth: Calculate value of growing dividend streams
- Investment Planning: Plan for investments with growing contributions
Understanding Growing Annuities
- Growing Payments: Payments increase by a fixed rate each period
- Growth Rate: Percentage increase per period (e.g., 3% annually)
- Interest Rate: Must be greater than growth rate for formula to work
- Common Uses: Retirement savings, salary increases, dividend growth
Why Use Our Calculator?
- ✅ Growing Payments: Account for payments that increase over time
- ✅ Future Value: See future value with growing payments
- ✅ Present Value: See present value of growing payment stream
- ✅ Realistic Planning: Model real-world scenarios with growth
- ✅ 100% Free: No registration or payment required
Frequently Asked Questions
What is a growing annuity?
A growing annuity is a series of payments that increase at a constant rate each period. For example, if the initial payment is $1,000 and the growth rate is 3%, the second payment is $1,030, the third is $1,060.90, and so on. This models real-world scenarios like salary increases, inflation-adjusted payments, or dividend growth.
Why must the interest rate be greater than the growth rate?
For the growing annuity formula to work correctly, the interest rate must be greater than the growth rate. If the growth rate equals or exceeds the interest rate, the formula breaks down mathematically. In practice, this usually holds true - interest rates on investments are typically higher than inflation or payment growth rates.
What are common uses for growing annuities?
Growing annuities are used to model: (1) Retirement savings with increasing contributions over time, (2) Salary-based payments that increase with raises, (3) Dividend payments that grow annually, (4) Lease payments with escalation clauses, (5) Any payment stream that increases at a constant rate.
How does this differ from a regular annuity?
A regular annuity has fixed payments (same amount each period), while a growing annuity has payments that increase by a fixed percentage each period. Growing annuities are more realistic for many scenarios where payments increase over time due to inflation, salary growth, or other factors. Regular annuities are simpler but less realistic for long-term planning.