Annuity Table: What It Is and How to Use It

An annuity table (also called the present value interest factor of an annuity, PVIFA) provides pre-calculated factors that simplify finding the present value of a series of future payments. It’s commonly used by financial professionals to compare lump-sum offers with structured payments (pensions, settlements, lottery payouts, etc.) by discounting future cash flows to today’s dollars.

Key takeaways

• An annuity table gives a factor based on the discount rate (interest rate) and the number of periods; multiply that factor by the periodic payment (PMT) to get the present value.
• Use the ordinary annuity formula when payments occur at the end of each period; use the annuity-due adjustment when payments occur at the beginning of each period.
• Comparing the present value of an annuity to a lump-sum lets you decide which option is financially better given your discount rate.

Core formulas

Present value of an ordinary annuity:
P = PMT × (1 − (1 + r)^−n) / r

Present value of an annuity due (payments at period start):
P_due = P × (1 + r)

Where:
* P = present value of the annuity stream
PMT = periodic payment amount
r = discount rate (per period)
* n = number of periods

How to use an annuity table

1. Identify the discount rate (r) and the number of payment periods (n).
2. Look up the PVIFA factor at the intersection of r and n in the annuity table.
3. Multiply that factor by the periodic payment (PMT): P = PMT × factor.
4. If payments are at the beginning of periods (annuity due), multiply the result by (1 + r).

Annuity tables save time by providing the factor (the fraction in the formula) so you don’t need to compute powers and divisions manually.

Example

You have an offer of $50,000 per year for 25 years or a lump-sum of $650,000. Use a discount rate of 6% (r = 0.06) and n = 25.

Calculate the ordinary-annuity present value:
Factor = (1 − (1 + 0.06)^−25) / 0.06 ≈ 12.78336
P = $50,000 × 12.78336 ≈ $639,168

Compare with the lump sum:
* Ordinary-annuity PV ≈ $639,168 → lump sum ($650,000) is preferable by about $10,832.
* If payments are at the beginning of each year (annuity due): P_due = $639,168 × 1.06 ≈ $677,518 → annuity due is preferable over the $650,000 lump sum by about $27,518.

Note: Annuity table factors are typically rounded, so small numeric differences with formula-based calculations are normal.

Ordinary annuity vs. annuity due

• Ordinary annuity: payments at the end of each period (use the standard formula).
• Annuity due: payments at the beginning of each period (multiply the ordinary-annuity PV by 1 + r).

Common uses

• Pension and retirement income analysis
• Settlement and structured-payment valuation
• Lottery prize decisions (lump sum vs. annuitized payments)
• Accounting and actuarial present-value calculations

Why annuity tables matter

An annuity table simplifies present-value calculations and helps you make informed comparisons between future payment streams and lump sums. By understanding the discount rate and number of periods—and whether payments are at period start or end—you can evaluate offers and choose the option that best fits your financial goals.