How Much Does a $100,000 Annuity Pay per Month?

Answering the question, “How much income will I have in retirement?” is at the heart of retirement income planning for millions of Americans retiring each year. Annuities are among the safest and most reliable sources of lifetime income for retirees, playing a crucial role in building diversified income sources that can support a long retirement through economic ups and downs.

Annuities come in many shapes and sizes, each offering different benefits to support a retiree’s financial needs. To choose the right product and income options, it’s important to start by understanding the factors that impact the level of available income.

Annuities can be complex, with various factors affecting your monthly income. Here are some key elements that influence income annuities.

Income annuities are designed to provide a steady and guaranteed income stream, either immediately or in the future when you start receiving payments.

However, many annuities can remain as deferred investment vehicles indefinitely without ever being converted into a series of payments. Examples include Multi-Year Guaranteed Annuities (MYGAs), Fixed Index Annuities and Variable Annuities. If these are not annuitized, they may not guarantee a regular income stream unless specific riders are added. As with other retirement investments, you can withdraw money penalty-free after age 59½.

Your age when the annuity payments begin plays a significant role in determining the payout amount. Generally, the older you are, the higher your monthly income will be, as it reflects a shorter expected lifespan. Calculations for payouts are done separately for men and women. Since women typically have a longer life expectancy than men, the payouts for women are usually lower than for men of the same age.

Insurance companies set annuity income rates based on their expected returns from the funds contributed by consumers. They rely on long-term market projections, but current interest rates and economic conditions also play a critical role. Higher interest rates generally lead to better offers, as companies can invest these funds in income-generating assets and remain competitive in the market.

Payout terms significantly impact the monthly income from an annuity. The longer the expected payment period, the lower the monthly payout will be. Some of the most common income payment options include:

Income annuities are typically the simplest type of annuities, designed to convert a lump sum into periodic lifetime income payments, akin to creating a private pension. Unless a Cost of Living Adjustment is included, payments will remain level throughout the life of the annuity contract.

The amount of income generated depends on several factors, including age, sex, interest rate expectations, whether the contract covers one or two people and any additional guarantees like a cash refund rider.

As of July 2024, the following monthly payouts are available for a $100,000 Immediate Income Annuity:

The most common types of income annuities are the Single Premium Immediate Annuity (SPIA) and the Deferred Income Annuity (DIA). A SPIA is funded with a lump sum and starts payouts within 12 months or as soon as the month following the purchase. In contrast, a DIA begins payouts more than a year after purchase.

While SPIAs are usually funded with a single payment and annuitized almost immediately, DIAs can be funded over time with multiple contributions. DIAs earn a guaranteed rate of return from the insurance carrier until the income starts.

As of July 2024, the following monthly payouts are available for a single-life (male) $100,000 Immediate Income Annuity or $100,000 Deferred Income Annuity:

As of July 2024, the monthly payouts for a $100,000 Immediate Income Annuity or Deferred Income Annuity for a single female are as follows:

Retirement planning is not purely a science—it’s a blend of financial strategy and personal values. No two retirements are the same because no two people are the same. Effective retirement planning must address both financial realities and the emotional needs of retirees. While details such as income, assets, debts, and expenses are crucial, they are complemented by understanding how retirees wish to spend their time, manage risks, prepare for uncertainties and leave a legacy.

Frank and Olivia, both 65 years old, plan to retire at 67, when they reach their Social Security full retirement age. They anticipate receiving a combined $44,000 per year from Social Security. Their current retirement savings include $430,000 in investments, $40,000 in cash and $100,000 in taxable investments. They expect their total retirement expenses to be $65,000 annually, including taxes, with $50,000 categorized as “essential” expenses they are unwilling to compromise on.

In excellent health and expecting a long retirement, Frank and Olivia are concerned about market fluctuations and want stability in their retirement income. They prefer not to adjust their expenses yearly due to market changes and are planning to enjoy some travel in the early years of retirement. Their biggest concern is the possibility of having to forgo travel due to unforeseen circumstances.

They also wish to leave a legacy for their two children but are unsure if this is feasible. Five years ago, they downsized to a smaller condo near the city, valued at $400,000, with no mortgage. This move was intended to be closer to their children and grandchildren.

Currently, Frank and Olivia face a $21,000 shortfall between their annual Social Security income and their total expected expenses. Their “essential” expenses alone exceed their guaranteed income by $6,000, which is a major concern since covering these essential costs is a top priority for them.

Their total income-capable assets, excluding their emergency fund, amount to $530,000. Applying the traditional 4% withdrawal guideline to these assets would generate approximately $21,200 per year. While this amount covers the gap between their Social Security income and their total expenses, it does not fully address their need for guaranteed income.

To address the guaranteed income gap and ensure that their essential expenses are fully covered, Frank and Olivia can consider using an income annuity funded by their bond allocation. This strategy can help them achieve the following:

When Frank and Olivia turn 67, they can fund the income annuity with a portion of their bond allocation, ensuring they have a guaranteed income stream that meets their essential needs and aligns with their retirement goals. This strategy provides financial security while preserving their legacy for future generations.

This plan allows Frank and Olivia to exceed their target income while meeting their guaranteed income minimums. Additionally, they can leave all $40,000 in cash and $50,000 in Roth IRA assets untouched. If they need these assets, they remain available for use. If not, the assets will continue to grow until inherited by their children.