For many retirees, securing a steady stream of income is a top priority.
One way to protect against the risk of outliving your savings is through an income annuity, a financial product that provides guaranteed monthly payouts in exchange for a lump sum investment.
Income annuities come in two forms: Immediate annuities, which start payments within 12 months of signing your contract and deferred annuities, which delay payouts until years in the future.
Annuities often get a bad rap for their complexity, onerous fees and lack of liquidity. Income annuities dodge the first two criticisms — they tend to be simpler with lower fees.
Waiting for the catch? Income annuities require a large upfront sum and it’s difficult — if not impossible — to get your money out, putting them out of reach for retirees with modest savings or those who favor more liquidity in their portfolios.
So, how much money do you need to buy an annuity? Here’s how much $1 million can get you.
How much can you expect from a $1 million annuity?
Below, we break down how much a $1 million annuity pays out under different scenarios.
We only looked at immediate income annuities and deferred income annuities. Many other types of annuities exist, but it’s much harder to compare payouts of those products since they have variable returns and other opaque mechanisms within the contract. With immediate or deferred income annuities, what you see is generally what you get.
The exact amount you can expect to receive each month from an income annuity depends on several factors, including:
- Your age
- Gender
- Location
- Payout structure (life only, joint life or life with period certain)
- When you start receiving payments (now or later)
- Current interest rates
We’ll dive deeper into these factors and how they impact potential payouts later.
We used real quotes from Income Solutions, an online marketplace that lets consumers compare annuity quotes side by side without entering a phone number. For retail buyers using Income Solutions, there’s a one-time, flat fee of 2 percent. This fee is built into the quotes you see and is fully disclosed during the transaction process.
Income Solutions provided quotes from five annuity companies, all with AM Best ratings of A or higher:
- Nationwide
- Integrity Companies
- Lincoln National Life Insurance Company
- Symetra
- Minnesota Life Insurance Company
Finally, for the quotes below, we set Florida as the annuitant’s location and did not opt for an annual cost of living increase (most income annuities don’t offer them anyway). Quotes were obtained Jan. 29-30, 2025.
Scenario No. 1: 65-year-old woman – immediate income annuity
A 65-year-old woman purchasing an immediate income annuity for her life only can expect between $6,137 and $6,486 per month.
If the same woman waits five years to buy the same annuity (when she’s 70 years old), her monthly payments increase to as much as $7,311 a month.
Now, what if the 65-year-old woman wants to ensure her family receives some of the money she’s put into this annuity if she passes away? When we add a 10-year period certain to the contract — which guarantees that if the woman dies within the first 10 years of her contract, her beneficiary will receive payments for the remainder of the 10-year term — it reduced her monthly payouts slightly, with the highest quote coming in at $6,391 per month vs. $6,486.
Scenario No. 2: 50-year-old male – deferred income annuity
A 50-year-old man purchasing a deferred income annuity that begins paying at age 65, with a death benefit available before payments start, would receive:
- $14,074 per month (Integrity Companies, A+ rating from AM Best)
- $12,437 per month (Symetra, A rating from AM Best)
(Only two out of the five insurers on Income Solutions offered a deferred income annuity).
Now, let’s tweak some of those metrics.
What if the same man waits until age 55 to purchase the annuity, and payments start when he’s 70? Even though the annuity is deferred for the same amount of time (15 years), by delaying payouts until age 70 (instead of 65), his monthly amount goes up, with a low offer of $14,684 per month and a high offer of $16,384 per month.
Scenario No. 3: Joint-life immediate income annuity
A joint-life annuity ensures that after one annuitant dies, payments continue for the life of the surviving spouse. If the surviving spouse receives 100 percent of the deceased annuitant’s payout, monthly payments range from $4,852 to $5,543 per month based on quotes for a 65-year-old man and a 60-year-old woman.
What happens if we reduce the wife’s survivor benefit from 100 percent to 50 percent? (Meaning, her monthly benefit is half the size of her late husband’s.) Monthly payouts increase, with quotes ranging from $5,594 to $6,148 per month.
What if you invest less? Payouts for lower amounts
If you don’t have $1 million to invest in an annuity — and most people don’t — here’s how the numbers change for $500,000, $250,000 and $100,000 annuities with all other factors staying the same.
$500,000 annuity payouts
- 65-year-old woman – immediate income annuity: $2,858 – $3,219 per month
- 50-year-old male – deferred income annuity: $6,202 or $7,037 per month
- Joint-life immediate income annuity: $2,450 – $2,800 per month
$250,000 annuity payouts
- 65-year-old woman – immediate income annuity: $1,446 – $1,628 per month
- 50-year-old male – deferred income annuity: $3,140 or $3,584 per month
- Joint-life immediate income annuity: $1,213 – $1,381 per month
$100,000 annuity payouts
- 65-year-old woman – immediate income annuity: $575 – $643 per month
- 50-year-old male – deferred income annuity: $1,236 or $1,433 per month
- Joint-life immediate income annuity: $558 to $609 per month
Factors that influence an income annuity’s payout
While these quotes can give you a ballpark of how much money you could expect from an income annuity, it’s clear that certain factors influence the payout significantly.
Here are the main variables that impact how much guaranteed income you receive each month in retirement, and whether adjusting those factors increases or decreases your payout.
Age
The older you are when your annuity payments begin, the higher your monthly payout, since the insurer expects to make payments over a shorter period. The best age to buy an annuity ultimately depends on your personal situation and goals.
Gender
Women typically receive slightly lower monthly payouts than men because they tend to live longer, meaning insurers expect to make more payments over time.
Payment start date
When your payments begin also makes a big difference in the payout you receive.
- Immediate annuities: Start paying within the first 12 months of signing your contract. This type of annuity is also called a single-premium immediate annuity, or SPIA.
- Deferred annuities: Begin payouts at a future date, often years or even decades in the future.
Deferring an income annuity allows interest to accumulate and compound over time, which leads to higher payouts. However, the trade-off is the annuitant must wait years before receiving income.
And unlike other types of deferred annuities, which allow you to make a series of premiums during the accumulation period, deferred income annuities are funded with a single lump sum, which means you’ll need to have the money saved up much earlier in life.
Payout structure
- Life-only annuities pay out for as long as you live, maximizing your monthly income.
- Joint-life annuities continue payouts for the life of the annuitant as well as their surviving spouse after the first annuitant dies. To be clear, that doesn’t mean both people receive a payment while they’re both alive. Survivor benefits can be structured so that the surviving spouse receives 50, 66.6, 75 or 100 percent of the payment their late spouse received. The higher the survivor benefit, the lower the monthly payout will be for the other spouse.
- Annuities with a guaranteed period (such as a 10-year period certain) ensure beneficiaries continue receiving payments from the insurer if the annuitant dies within a certain term (such as the first five, 10 or 15 years of the contract). This option slightly reduces monthly payouts.
Interest rates
Income annuity payouts are tied to prevailing interest rates. Higher interest rates generally lead to higher monthly payments.
In January 2025, payouts were higher than they were from 2012-2020, when interest rates were at or near historic lows. However, current payouts are lower than they were between May 2023 and September 2024, when interest rates were at a 20-year high.
Inflation protection
Adding an inflation-adjustment feature decreases the initial payout but payments increase over time by 1 to 5 percent a year. Most income annuities don’t offer an inflation adjustment, and some retirees choose to forgo it in order to maximize their upfront payments.
Income annuities vs. other annuities
Income annuities are a no-frills, low-cost product compared to many other types of annuities. You provide a lump sum of money to an insurance company and, in return, they promise to send you a monthly check for the rest of your life, regardless of how long you live, similar to a pension.
SPIAs and deferred income annuities don’t tie their performance to a stock market index or underlying investments. That means there aren’t any investment subaccounts, participation rates or market-driven returns to keep track of. Your monthly payout is tied to a prevailing interest rate set by the insurer when you purchase the contract.
However, there are some downsides to purchasing an income annuity. One major issue is payout amounts generally don’t adjust for inflation. This means if you had bought an annuity in 2020, before inflation soared, your monthly payments would be worth considerably less in today’s dollars.
Perhaps the biggest deterrent is the large amount of capital needed to generate a sufficient monthly payment.
After all, most financial experts recommend putting no more than a quarter of your savings into an income annuity. So ideally, someone purchasing a $1 million annuity has a $4 million nest egg or more. Statistically, most Americans simply don’t have that much capital at their disposal.
But the less cash you bring to the table, the lower your payouts will be. While a 65-year-old woman can generate payouts as high as $6,486 if she invests $1 million in an immediate income annuity, that payout shrinks to as little as $575 per month with a $100,000 investment.
Many retirees may find it difficult to commit so much of their savings. This initial cost also comes with losing access to the principal because once the income annuity begins making payments, most don’t allow withdrawals.
Due to these drawbacks, some people turn to other types of annuities, even though they’re more complex and often jammed with higher fees.
For example, variable annuities tie their returns to underlying investments, offering the potential for growth, but they also carry investment risk and are notorious for high fees, commissions and optional rider costs. Index-linked annuities provide some exposure to market gains while protecting against some downside risk, but they have complicated mechanisms that can limit upside potential.
Bottom line
An income annuity can be a reliable way to generate guaranteed monthly income in retirement. The exact payout depends on multiple factors, including your age, gender, type of annuity and additional features like survivor benefits or death benefits. As the quotes show, a $1 million annuity can provide anywhere from $4,852 to over $14,000 per month, depending on the contract structure.
For those considering an annuity, shopping around and comparing quotes from multiple insurers is essential. If an annuity fits your financial goals, consulting a trusted financial advisor can help you evaluate quotes from insurers and select the best structure for your needs.
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