How Much Does an Annuity Pay Per Month? A Plain-English Guide

Annuities convert a lump sum into a stream of guaranteed income - which is exactly why they're appealing in retirement. But how much will an annuity actually pay you each month?

The answer depends on four things: how much you invest, your age at the start of payouts, the type of annuity you choose, and current interest rates. Use our Annuity Payout Calculator to model your exact scenario in seconds.

What Is an Annuity?

An annuity is a contract with an insurance company: you give them a lump sum (or series of payments), and they promise to pay you a fixed income stream - either for a set period or for life.

Annuities come in several forms, but for retirement income planning, two matter most:

For most people, a Single Premium Immediate Annuity (SPIA) is the simplest way to turn savings into income. This guide focuses there.

How Much Does an Annuity Pay Per Month?

Monthly payout depends on three key inputs:

1. Premium (lump sum invested) - More money in means more income out
2. Your age - Older annuitants get higher monthly payments because payouts are spread over fewer expected years
3. Payout structure - Life-only, joint-life, or period-certain payouts produce different amounts

Here are 2026 estimates for a single male choosing a life-only immediate annuity:

Rates are illustrative estimates for 2026. Use our Annuity Payout Calculator for current, personalized figures.

Females typically receive 5-10% lower payments because their life expectancy is longer - the insurer is spreading the same premium across more expected payments.

Payout Options: What Changes the Numbers

Life-Only vs. Period-Certain

Life-only pays the most each month but stops when you die - even if that's after just one payment. It's the highest-income option but leaves nothing for heirs.

Period-certain (e.g., 10 or 20 years) guarantees payments for a set term regardless of when you die. If you die in year 3 of a 20-year contract, your beneficiary receives the remaining 17 years of payments. Monthly income is lower.

Life with period-certain combines both: guaranteed income for life, minimum period guaranteed to beneficiaries. Most popular structure.

Joint-Life Annuity

For married couples, a joint-and-survivor annuity continues paying as long as either spouse is alive. Payouts are lower - typically 10-15% less than single-life - because the payout window is longer.

Annuity vs. Drawing Down Investments

The central question: should you buy an annuity or just withdraw from your portfolio?

Most financial planners suggest using an annuity to cover your essential expenses - housing, food, utilities - while keeping the rest of your portfolio invested. Combined with Social Security, an annuity can create a guaranteed income floor so you never face the sequence-of-returns risk that wipes out portfolios in early retirement.

Use the Retirement Withdrawal Calculator to model what a mix of annuity income + portfolio withdrawals looks like across different market scenarios.

How Annuity Payments Are Taxed

Tax treatment depends on how you funded the annuity:

With pre-tax money (IRA/401k funds): 100% of each payment is ordinary income. The insurer will send a 1099-R each year.

With after-tax money (non-qualified annuity): Only the earnings portion is taxable. Your cost basis is recovered tax-free through the "exclusion ratio" - a calculation the insurer provides.

Roth IRA-funded annuity: Qualified distributions are completely tax-free.

Before purchasing, understand the tax picture. For qualified annuities purchased inside an IRA, RMD rules still apply - see our RMD Calculator to understand how required distributions interact with annuity income.

Is an Annuity Right for You?

An annuity is strongest when:

• You're concerned about outliving your money (longevity risk)
• Your other guaranteed income (Social Security, pension) doesn't cover essential expenses
• You want certainty over flexibility in at least part of your income
• You're in good health and expect to live into your 80s or beyond

An annuity is less ideal when:

• You have significant health issues and a shorter life expectancy
• You need flexibility to access your lump sum for emergencies
• You already have pension income that covers your basics
• You're young enough that long-term market exposure is more efficient

For a deeper look at maximizing your retirement income strategy, see how to maximize Social Security benefits and 401(k) contribution strategies.

How to Compare Annuity Quotes

If you're considering an annuity purchase:

1. Get at least 3-5 quotes from different insurers - rates vary significantly
2. Check the insurer's financial strength - AM Best A or higher is the minimum
3. Understand the surrender period - deferred annuities often have 7-10 year surrender charges
4. Ask about inflation riders - a 2-3% annual increase costs more upfront but protects purchasing power
5. Run the math against alternatives - compare the payout to the 4% rule on the same lump sum

Use our full Annuity Calculator to compare deferred accumulation scenarios, or our Annuity Payout Calculator to see immediate income estimates.

For most retirees, the right answer isn't "all annuity" or "no annuity" - it's a thoughtful combination. Explore the full suite of retirement calculators to build a complete picture.

FAQ

How much does a $100,000 annuity pay per month?

A $100,000 single premium immediate annuity for a 65-year-old male typically pays $520-$560 per month (life-only) in 2026, depending on the insurer and current interest rates. A 70-year-old would receive closer to $610-$650/month. Use our Annuity Payout Calculator for a personalized estimate.

What is the difference between an immediate and a deferred annuity?

An immediate annuity starts paying within 30 days of your lump sum payment - ideal for current retirees. A deferred annuity accumulates value for years before payouts begin, allowing your money to grow first. Deferred annuities come in fixed, variable, and indexed forms.

How are annuity payments taxed?

If funded with pre-tax money (from an IRA or 401k), 100% of each payment is taxable as ordinary income. If funded with after-tax dollars, only the earnings portion is taxed; your cost basis is returned tax-free via the exclusion ratio. Roth-funded annuity payments are tax-free.

Is an annuity better than keeping money in a 401(k)?

Neither is universally better - they solve different problems. A 401(k) offers growth, flexibility, and estate value. An annuity offers guaranteed income and longevity protection. Many retirees use both: a 401(k) for growth and an annuity to create an income floor alongside Social Security.

What happens to an annuity when you die?

It depends on your payout option. A life-only annuity stops at death - no payment to heirs. A period-certain annuity pays the remaining guaranteed period to a beneficiary. A joint-life annuity continues until the surviving spouse dies. Choose your payout structure carefully based on your estate goals.

Annuity decisions are major financial commitments. Use our Annuity Payout Calculator to model different scenarios before making any purchase decision. For a full retirement income picture, explore our retirement calculators hub.