Most people who are looking to invest are not likely to be financial experts. They simply want to find ways to make their money grow. So, when it comes to calculating projected earnings, the cost of a loan or an investment, and determining the value of a possible investment, they usually turn to a financial expert to help them understand. But for those who may not wish to go in the direction of hiring a financial manager, they may opt to use annuity tables to help them figure out what they need to know.
Limitations of Annuity Tables
While using these tables and charts can certainly simplify the calculation process, it is important to recognize that they will not give you the same level of accuracy as using a financial calculator does. They do use the same formulas as electronic calculators but since the calculations are not specific to a certain set of parameters, the results are rounded off to the fewest decimal places. They also tend to be more limited in options for interest rates, and time periods as well. Still, despite these limitations, these tables can still serve a purpose in a variety of settings.
Using the Annuity Tables
When you don't have the electronic devices at your disposal, using the annuity tables can be a great asset. To determine the present value amounts you can look at the present value tables online. The first column reflects the number of repeat annuity payments designated for a specific time period. The other columns reflect factors that are affected by the interest rate. At the point where the interest rate meets a specific number of payments, you'll have found the PVOA factor. By multiplying this factor by the annuity's payment amount, you'll get the present value of the annuity.
Who Uses Annuity Tables
Annuity tables can be used for a wide range of investment possibilities but are probably more commonly used to determine the worth of the user's retirement plan. With these tables you can get a rough estimate of the worth of your plan for the point when you reach retirement age. You will be able to see just how much money you should have at your disposal and whether or not you need to make adjustments as to how much you're putting away for those golden years.
However, they can be used for a lot more than retirement income. Many use them to help calculate how much money they need to set aside to pay for their children's college tuition, others will use them to calculate how much money they should put into a particular investment opportunity. Whatever the reason for using an annuity table, it is clear that while it won't give you 100% accurate figures, it can give you a basic snapshot of the future and what you can look forward to with your money. Everyone needs to plan for their future in some way. Those who are smart will start early in managing their finances by using these tables to help them to decide what the future will hold for them.