How Much Does a $1 Million Annuity Pay Per Month?

An annuity is a popular option for generating monthly income during retirement. With different types of annuities available and various strategies for utilizing them, payout amounts can vary significantly. Understanding these options can help you tailor your retirement income plan to meet your financial needs.

If you’re getting a $1 million annuity, here’s how much you might get based on different qualifications.

Annuities are insurance products you buy either in a lump-sum payment or over a few payments. While it’s not life insurance, an annuity can give you peace of mind during retirement. After you buy an annuity, you’ll receive disbursements — either as a lump sum or as monthly payments — over a set amount of time outlined in your annuity terms.

Depending on your annuity type, you could receive your payments right away through an immediate annuity or get payments later through a deferred annuity. A fixed annuity ensures getting the same amount every month, while a variable annuity means your payments could fluctuate based on how someone invests your funds through the stock market.

When considering a $1 million annuity, it’s essential to understand the different types available, as each can significantly impact your monthly payouts. Annuities come in various forms—such as fixed, variable immediate and deferred—each with its own payout structure and benefits. In this section, we’ll explore these types and provide examples of potential monthly income based on a $1 million investment, helping you make informed decisions about your retirement income strategy.

By investing in a fixed annuity, you should expect the same monthly payout for a set amount of time. You’ll get a fixed dollar amount set by the insurance company. Once your disbursements begin—whether immediately or deferred—you’ll receive at least the minimum guaranteed interest rate established by your insurer.

A $1 million fixed annuity can yield varying monthly payouts depending on several factors, including when you choose to begin receiving disbursements, your age and gender, whether the policy is single or joint and your life expectancy. Each of these elements plays an important role in determining the income you can expect during retirement.

If you’re a 65-year-old male with a $1 million immediate, single-life annuity. You can expect to get around $6,313 per month. Females tend to live longer, so payments are usually less, which means they’d get around $6,073 monthly.

While fixed annuities offer a set amount of money per month, variable annuities can give you a range based on risk tolerance, investment returns and market conditions. Variable annuities allow the insurer to put your money into an investment account. Some variable annuity agreements will enable you to get a minimum guaranteed interest rate, but it depends on the terms you have.

There is a wide range of payout options for variable annuities since they’re based on market performance. Remember that it is possible to lose money depending on market conditions and the type of investments your insurance company sets up for you. In the last 30 years, the stock market has averaged between 8% and 11% returns, meaning you can expect close to that range if you get a $1 million variable annuity.

With an immediate annuity, you’ll receive immediate disbursements as soon as you buy the product. Like a variable annuity, the payout you receive depends on a few factors, including your age, sex, life expectancy and annuity terms.

For a 70-year-old male with a $1 million immediate, single life annuity, monthly payments are around $7,110. For a 70-year-old female, it’d be around $6,764 per month.

If you’d rather hold off on receiving disbursements, you may want to consider a deferred annuity. Deferring an annuity and keeping your funds in an investment account longer means your money can grow more over time, resulting in a larger payout when it comes time to take disbursements.

Because deferred annuities involve a range of factors—including fixed or variable interest rates and varying contract terms—monthly payments can differ significantly. Understanding these variables is essential for determining the income you can expect from your investment.

When considering annuities as a source of retirement income, it’s essential to understand the factors that influence your monthly payouts. Key elements such as interest rates, the term of the annuity, payout options and inflation adjustments play significant roles in determining how much you will receive each month. By grasping these components, you can make informed decisions that align with your financial goals and ensure a more secure retirement.

For high-income earners, a $1 million annuity may help you cover all your needs while in retirement, especially if you receive other types of income through a 401(k) or Social Security.

It’s essential to consider your long-term needs and how much you can afford. It may be a good idea to find a financial advisor to help with any concerns or questions you may have. Though, not all financial advisors or planners have experience with annuities, so ask around for referrals to see if you know someone who does. Talk over your needs with someone who can help determine if you’re on the right track.

An annuity is one way to guarantee income during retirement. While there are other means of earning retirement income, they may not be sustainable enough for one to live off of once one stops working.

A $1 million annuity payout differs for everyone, depending on the type of annuity, your life expectancy and annuity term, among many other factors. Do your research diligently before investing in an annuity to ensure it can cover all of your retirement needs.

Editor Norah Layne contributed to this article.