Annuities can provide you with guaranteed income in retirement but what amount of annuity payouts you receive each month depends on several factors including your age, gender, amount invested, interest rate, life expectancy and the type of annuity you choose.
For retirees seeking a steady stream of income, an immediate annuity is a popular choice. With an immediate annuity the amount you invest is converted into regular payments over a set period or for your lifetime. Retirees know exactly how much they will receive and for how long. In addition to providing guaranteed income, an immediate annuity provides consistent payments, stock market risk protection and peace of mind. You can invest as much as you want in an annuity but balances tend to range from $200,000 to $1 million, according to Ken Nuss, founder and CEO of AnnuityAdvantage. That doesn’t mean you can’t purchase an annuity with $50,000 or $100,000.
How do interest rates affect annuity payouts?
When it comes to how much you’ll receive each month, the interest rate is a key factor in your annuity payout. The higher the interest rate, the more money you get.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
“What ultimately impacts the payout is the expected return the insurance company gets on the premium,” says Stephen Kates, principal financial analyst at Annuity.org. “The higher the rates are, the better.” Beyond interest rate, here are the factors that impact your annuity payment.
Amount deposited: The more you deposit in the annuity the more of a payout you’ll receive.
Age: The older you are when purchasing an annuity the higher the payment. The insurance company doesn’t expect you to live as long as someone who purchases an annuity at a younger age, thus the higher payment.
Gender: Since women tend to live longer than men, the payment is typically smaller for females than males. At last check, the life expectancy for males and females in the U.S. is 74.8 years and 80.2 years, respectively.
Premium amount: A bigger initial premium will yield you a larger payment each month. Keep in mind once you purchase an annuity that money is not accessible without facing potential penalties and fees.
Payout choice: With an immediate annuity you can choose to have it pay you until your death, which is known as a single-life payout or have it continue to pay a survivor or beneficiary. Known as a joint or survivor payout, your monthly annuity payout will be lower than with a single-life payout option.
Period of payouts: If you choose to guarantee payments for your lifetime, your payout will be smaller than if you selected a ten-year term. Many retirees select a lifetime payout to guarantee income for the long haul.
What are immediate annuities?
Immediate annuities can be fixed, variable or indexed. With a fixed immediate annuity the interest rate is fixed when the contract is signed, which gives you that protection from fluctuations in the markets. With a variable annuity, payments fluctuate based on the performance of the underlying investment. An indexed annuity payout is linked to the performance of a specific market index. A fixed immediate annuity typically has the smallest return but it is the safest and most consistent. You know what you are getting paid. There are no surprises.
How much does a $100,000 annuity pay per month?
Before you purchase an immediate annuity you probably want to know how much income it will give you each month. That will help you determine how much money you want to annuitize and how it will impact your monthly budget. While all of the factors discussed above impact the annuity payout, you can get a general idea of how much your annuity payout will be monthly below. We’ve based the payouts on a fixed immediate, life-only annuity, with the buyer aged 65. Data is provided by Annuity.org.
Immediate annuity amount: $50,000
Buyer age: 65
Buyer sex: Female
Payout: $300
Immediate annuity amount: $50,000
Buyer age: 65
Buyer sex: Male
Payout: $314
Immediate annuity amount: $100,00
Buyer age: 65
Buyer sex: Female
Payout: $599
Immediate annuity amount: $100,00
Buyer age: 65
Buyer sex: Male
Payout: $629
Immediate annuity amount: $200,00
Buyer age: 65
Buyer sex: Female
Payout: $1,199
Immediate annuity amount: $200,00
Buyer age: 65
Buyer sex: Male
Payout: $1,258
Immediate annuity amount: $250,000
Buyer age: 65
Buyer sex: Female
Payout: $1,498
Immediate annuity amount: $250,000
Buyer age: 65
Buyer sex: Male
Payout: $1,572
Immediate annuity amount: $300,000
Buyer age: 65
Buyer sex: Female
Payout: $1,798
Immediate annuity amount: $300,000
Buyers age: 65
Buyers sex: Male
Payout: $1,886
Immediate annuity amount: $500,000
Buyer age: 65
Buyer sex: Female
Payout: $2,997
Immediate annuity amount: $500,000
Buyer age: 65
Buyer sex: Male
Payout: $3,144
Immediate annuity amount: $750,000
Buyer age: 65
Buyer sex: Female
Payout: $4,495
Immediate annuity amount: $750,000
Buyer age: 65
Buyer sex: Male
Payout: $4,716
Immediate annuity amount: $1 million
Buyer age: 65
Buyer sex: Female
Payout: $5,993
Immediate annuity amount: $1 million
Buyer age: 65
Buyer sex: Male
Payout: $6,288
Bottom line
Annuities are a way to guarantee income for your lifetime, but many factors impact how much of an annuity payout you’ll receive. Knowing how much you can get each month based on different contract sizes can help you plan your cash flow when you do decide to retire.
Related content
-
Ten Cheapest Places To Live in FloridaProperty Tax Make your Florida vacation spot daily living — these counties have the lowest property tax bills in the state.
-
I'm 50 and my home is worth $5 million. Can I retire now?It may be oh-so tempting to cash out your upscale home and leave work for good. But should you? We ask the experts.
-
I'm 50 and My Home Is Worth $5 Million. Can I Retire Now?
It may be oh-so tempting to cash out your upscale home and leave work for good. But should you? We ask the experts.
-
Bouncing Back: New Tunes for Millennials Trying to Make ItAdele's mournful melodies kick off this generation's financial playlist, but with the right plan, Millennials can finish strong.
-
Americans Are Retiring Later: Will This Trend Last?Given a host of pressures to keep working, Americans are retiring later in life. Will regulatory and economic forces encourage you to work longer?
-
Retiring Without a Partner? How Singles Can Maximize Their SavingsRetirement can be expensive, especially when you do it alone, surveys show. But there are ways to maximize your retirement savings even when facing your second act without a partner.
-
When Should You Hand Over the Keys — to Your Investments?The secret to retirement planning? "The best time to hand over the keys is before you’ve realized you need to hand over the keys."
-
Financial Steps After a Loved One's Alzheimer's DiagnosisIt's important to move fast on legal safeguards, estate planning and more while your loved one still has the capacity to make decisions.
-
Two Don'ts and Four Dos During Trump's Trade WarThe financial rules have changed now that tariffs have disrupted the markets and created economic uncertainty. What can you do? (And what shouldn't you do?)
-
I'm Single, With No Kids: Why Do I Need an Estate Plan?Unless you have a plan in place, guess who might be making all the decisions about your prized possessions, or even your health care: a court.
