Annuities, insurance contracts that convert a lump sum into guaranteed lifetime income, offer monthly payments that can range from $580 to $859 for a $100,000 investment, according to Annuity.org. The exact amount depends on factors such as age, gender, and whether the annuity is purchased individually or jointly with a spouse.
For a 65-year-old individual, a single life immediate annuity might pay approximately $660 to $644 per month, equating to about $7,920 to $7,728 annually. This income could cover basic expenses like groceries, utilities, or rent in many U.S. cities.
Age significantly impacts payouts. Older recipients receive higher monthly checks because insurers anticipate fewer years of payment. A 75-year-old male buying a single life annuity could get $859 per month, or $10,308 yearly, which is over 33% more than at age 65. Women generally receive slightly lower payments due to longer life expectancy, and joint life options further reduce payouts to account for coverage for two lifetimes.
Interest rates also influence annuity payments. In high-rate environments, payouts may increase by $50 to $100 monthly, while lower rates can decrease them. The primary appeal of annuities is the guaranteed income that continues regardless of lifespan. For example, a 65-year-old collecting $660 monthly would receive $237,600 by age 85 if they live that long, more than doubling the initial investment.
Annuities are suitable for individuals who do not want to risk outliving their savings, seek reliable coverage for essential expenses like housing or healthcare, come from long-lived families, or prefer to avoid stock market volatility. They are particularly useful for those without pensions who want to create a steady income stream from savings.
However, annuities have drawbacks. They are illiquid, meaning accessing funds early may incur surrender fees and penalties. They also typically offer lower long-term growth compared to the market. Inflation can erode the purchasing power of fixed payments over time, unless a cost-of-living-adjusted annuity is purchased, which usually starts with lower initial payouts.
Many experts recommend using annuities to cover non-negotiable expenses such as food, housing, and healthcare, while investing remaining funds for growth. A licensed financial adviser can help assess individual goals and determine how an annuity might fit into a broader financial plan.
A $100,000 annuity does not lead to wealth accumulation but provides certainty in retirement, which can be valuable for peace of mind.