Why Calculate Present Value Of Annuities? 
There are two popular and entirely different purposes to calculate present value of annuities . 1 -RRB- * Calculating retirement funding needs . Suppose you are planning to retire next month and want to purchase a fixed annuity with guaranteed interest rate of 3 % that will immediately start providing you with $ 25,000 of annual retirement income over the next 25 years . Being able to calculate present value of annuities helps you see the lump sum you will need to pay for your annuity -LRB- in this case , approx $ 435,330 -RRB- . 1 -RRB- * Calculating loan payments . Using the same example in reverse , let 's say you had a $ 435,330 mortgage at 3 % and you wanted to pay it off in 25 years . Purchasing an annuity for that amount would allow you to make payments of $ 25,000 per year for the next 25 years . * Both of these are overly simplistic examples . Talk to a licensed agent versed in annuities for specific annuity details . 