• Calculate annuity balance, interest earned, and payout
• Calculate loan payments, balance, and interest using the loan formula
• Compare loans in real-world applications

Building a Golden Future: Navigating Savings Annuities and Loans

Imagine you’ve finally reached the golden years of retirement. No more alarm clocks, no more meetings, just plenty of time to spend doing the things you love. We all dream of a comfortable retirement, with a savings cushion that lets us truly savor this time of our lives. But, how do we get there? Most often, we start building this cushion through retirement plans, most of which are examples of savings annuities.

 

Annuities might sound complicated but in reality, they are rather simple.

Let’s imagine a scenario: Your friend is [latex]24[/latex] years old and decides to start an IRA with [latex]$50[/latex] per month. The account anticipates a [latex]4.4\%[/latex] annual interest. They plan to keep this up for the next [latex]44[/latex] years, until they reach the retirement age of [latex]68[/latex].

Not everyone’s saving strategy is the same. For instance, you have another friend who feels [latex]44[/latex] years is a very long time to be saving. They decide to increase their monthly contribution to [latex]$100[/latex] but only save for [latex]22[/latex] years (assume the same interest rate of [latex]4.4\%[/latex]). They believe this should result in the same amount of money at the end of the account time.