How Much Does an Annuity Pay Per Month?

The table shows an illustrative monthly income range for a single-life immediate annuity, where payments start within a year of purchase and continue for the rest of your life. The low end of each range reflects a conservative quote, the high end a competitive one. The figures are generated by the same formula as our payout calculator, so what you see here and there will agree.

Takeaway: Read across a row to see how age changes the payment on the same premium; read down a column to see that the payment scales almost exactly with the premium.

Five inputs set the number on an income annuity quote. The first is your age, and specifically your life expectancy, because the insurer is pricing how many payments it expects to make. The second is the premium; payments scale in a straight line with the amount, so $250,000 buys two and a half times what $100,000 buys at the same age and terms. The third is the level of interest rates when you buy, since the insurer invests your premium in bonds and passes part of that yield through. Rates in a given year can move the payment noticeably in either direction.

The fourth input is the payout option. Life only pays the most because the insurer owes nothing after your death. Adding a period certain (payments guaranteed for 10 or 20 years to a beneficiary if you die early) trims the payment slightly. A joint-and-survivor option that continues while either spouse is alive trims it more, because the insurer is now covering two lifetimes. The fifth is the insurer itself: for identical terms, quotes from different companies can differ by a meaningful margin, which is why a specialist runs several before you choose.

• Older start age: higher payment per dollar.
• Larger premium: proportionally larger payment.
• Higher interest rates at purchase: higher payment.
• Period certain or refund options: slightly lower payment.
• Joint and survivor: lower payment, two lives covered.

An insurer prices a life annuity on the number of payments it expects to make. At 60 it expects to pay for more years than at 70, so it spreads the same premium across more months. In the table, $100,000 produces $430 to $550 a month at 60 and $550 to $710 at 70. Nothing about the buyer's skill or the insurer's generosity changed; only the expected payment count did.

This is also why an income annuity is rarely the best use of money in your fifties. The payment is low because the horizon is long, and the money is locked in during years when you might still be earning and investing. Most buyers who want lifetime income are best served starting it between the mid-sixties and mid-seventies, and using a deferred income annuity if they want to lock terms in earlier.

A quote that pays $600 a month on $100,000 is often described as a 7.2% payout rate. That is arithmetic, not a yield: $600 times 12 is $7,200, which is 7.2% of the premium. But most of that $7,200 in the early years is your own principal being returned in installments. The true investment return on a life annuity is unknowable at purchase, because it depends on how long you live. Die early and the return is negative; live to 95 and it far exceeds what a bond would have paid.

The right comparison is not "annuity payout rate versus CD rate." It is "how much guaranteed income does this buy for life, and what would it cost me to replicate that with withdrawals from an investment account that could run out." Comparing a payout rate to an interest rate is the single most common mistake in reading an annuity quote.

Takeaway: A 7% payout rate on an immediate annuity includes return of your own money. Compare it to the income you need, not to a savings rate.

A deferred income annuity (DIA) takes a premium today and starts paying at a date you choose, often 5 to 20 years later. Because the insurer invests the money in the meantime and expects to make fewer payments once they begin, the monthly figure for the same premium is much higher than an immediate annuity bought today. A 60-year-old who buys a DIA starting at 70 will typically be quoted a payment well above what the immediate annuity table shows for age 60, and often above the age-70 immediate figure as well, in exchange for receiving nothing for a decade.

The tradeoff is the wait itself and the risk of dying before the start date. Most DIAs offer a return-of-premium death benefit to cover that risk for a lower payment. A QLAC is a DIA bought with IRA money under IRS rules that also removes the premium from required minimum distribution calculations.

Using the table's single-life illustrative ranges, a $100,000 immediate annuity pays about $480 to $630 a month at 65 and $550 to $710 at 70. A $250,000 premium pays roughly $1,210 to $1,560 at 65. Half a million pays about $2,420 to $3,130 at 65 and $2,750 to $3,540 at 70.

A $1 million annuity pays about $4,830 to $6,250 a month at 65 and $5,500 to $7,080 at 70 on a single life. Those are large numbers, but they are also the full return of a large premium spread over a lifetime; anyone considering annuitizing seven figures usually splits the money across more than one insurer, keeps a share liquid, and layers in a joint option so a surviving spouse keeps receiving income.

Two reminders when reading these figures. First, they assume payments start now; a deferred purchase pays more. Second, they assume a single life with no guaranteed period; adding a spouse or a refund feature lowers them. A specialist can produce exact quotes for your age and options in a few minutes.

A guaranteed lifetime withdrawal benefit (GLWB) rider on a fixed index or variable annuity is another way to get lifetime income, and it is quoted differently. Instead of converting the premium into payments, the rider lets you withdraw a set percentage of a "benefit base" each year for life, commonly somewhere in the 4% to 6% range depending on your age when withdrawals start, while the contract value stays yours and continues to earn interest or index credits. If the contract value runs out, the insurer keeps paying the guaranteed amount.

The monthly figure from a rider is usually lower than a life-only immediate annuity on the same premium at the same age, because you keep the account value and the death benefit. Riders also carry an annual fee, often around 1% of the benefit base. Which produces more total income depends on how long you live and how the contract performs, so it is worth asking for both quotes side by side.

If you bought the annuity with after-tax money, each payment is split into a taxable portion (earnings) and a tax-free portion (return of your premium) using the exclusion ratio in IRS Publication 939. The tax-free portion continues until you have recovered your full premium; after that, payments are fully taxable. If the annuity was bought inside a traditional IRA or 401(k), or with a rollover from one, the entire payment is taxable as ordinary income because none of the money was taxed going in.

Payments made over your lifetime or life expectancy are not subject to the 10% additional tax for withdrawals before age 59 and a half, because a series of substantially equal periodic payments is an exception to that rule. A payout over a fixed number of years does not qualify on that ground, though an immediate annuity bought with after-tax money has its own exception. The insurer reports the payments on Form 1099-R each year.

Every income annuity has a minimum and maximum issue age set by the insurer. Minimums are often around 40 to 50 for deferred contracts and lower for immediate ones; maximums commonly fall between 80 and 90 for immediate annuities and lower, often 75 to 85, for deferred contracts and income riders. Past those ages the insurer simply will not issue the contract, so a buyer in their eighties has fewer choices and should shop early rather than late.

Waiting past about 75 to buy an income annuity rarely improves the outcome as much as the table suggests. The payment per dollar keeps rising with age, but the number of years you will collect it falls faster, and mortality credits (the share of the pool from people who die early) are already large by then. Buyers who want guaranteed income are generally best served buying between 65 and 75, and buyers who want to lock in a future start date are best served buying a DIA in their late fifties or sixties.

• Under 60: deferred income or accumulation contracts usually fit better than immediate income.
• 60 to 65: immediate annuities become reasonable; a DIA starting at 70 or later often buys more.
• 65 to 75: the sweet spot for immediate lifetime income on a single or joint life.
• 75 and over: still available, but maximum issue ages start to bind and the extra payout per year of waiting flattens.