How Much Does A $100,000 Annuity Pay Per Month? (2024)

An annuity—which is a contract with an insurance company that provides income—may be a good option as part of your retirement plan. It can deliver a steady source of income for years or even for the rest of your life. But before purchasing an annuity, you should consider how much retirement income you might gain from this investment.

It’s impossible to tell you exactly how much a $100,000 annuity pays per month because there are dozens of factors and options that go into each annuity. Here, we break down those factors to help you determine how much you might receive each month with an initial $100,000 investment in an annuity.

Factors That Impact How Much a $100,000 Annuity Pays Per Month

Age and Gender

Your age and gender generally affect the monthly payouts for an annuity since you’re paid based on your life expectancy. The younger you are when you start an annuity, the lower your monthly payment will be since you will likely receive payments for longer.

In terms of gender, women normally receive smaller monthly annuity payments than men because their average life expectancy is longer.

Annuity Type

Another factor that affects monthly payment amounts is the type of annuity. The two main types are immediate and deferred.

• Immediate annuities: With an immediate annuity, you make a one-time contribution. That contribution then turns into a steady stream of income over a set period, such as five years, or over your lifetime. Payouts start within one year of buying the annuity.
• Deferred annuities: With a deferred annuity, payouts start at a designated point in the future. You don’t pay income taxes on this money until you begin getting payments.

Generally, a deferred annuity supplies bigger payouts than an immediate annuity does. Why? Because a deferred annuity allows more time for your money to grow.

Both immediate and deferred annuities will be either fixed or variable, another factor that affects your monthly payment.

• Fixed annuities: A fixed annuity guarantees you’ll receive the amount you’ve invested plus a minimum rate of interest.
• Variable annuities: Payments from a variable annuity depend on the performance of investment options you picked for your annuity, which often are mutual funds.

Because of its investment feature, a variable annuity holds the potential to offer bigger payouts than an immediate annuity does. However, a variable annuity runs the risk of losing value if the underlying investments perform poorly.

Another type of annuity, an indexed annuity, can also cause payouts to be higher or lower. An indexed annuity typically pays returns based on the performance of a stock market index. Returns for an indexed annuity fluctuate more than a fixed annuity but less than a variable annuity.

Amount Invested

Another factor affecting your payout is how much money you put into your annuity. Typically, the more money you invest, the bigger your payouts will be. For instance, you might enjoy larger payouts if you invest $100,000 in an annuity rather than $75,000.

Payout Period

The payout period you choose for an annuity also affects how much money you’ll receive each month.

For example, you might select a fixed amount of money to receive each month. You’ll get these payments until you halt them or until all the money has been paid out. Or, you might select a certain payout period, such as 10, 15 or 20 years, for receiving monthly payments.

If you purchase a life annuity, the annuity provider sends payments for as long as you live. The amount of each payment depends largely on your estimated life expectancy. You can also choose a life annuity option that will continue to payout for the remainder of your spouse’s life. Adding this option will further decrease your monthly payment since payments are likely to continue for longer.

Additional Factors

Among the other factors that can impact annuity payouts are:

• Length of payout period. The longer you hold onto an annuity, the smaller your monthly payments might be. For instance, an annuity with a 20-year payout period likely will result in smaller monthly payouts than an annuity with a 10-year payout period.
• Interest rate. A higher interest rate for your annuity’s earnings can lead to bigger payouts. If an annuity pays an interest rate of 10%, for example, you stand to gain larger payouts than if an annuity pays an interest rate of 7%.
• Withdrawals. If you take money out of an annuity before an agreed-upon period, such as 10 years, you might be hit with what’s called a surrender charge. This is normally a percentage, such as 7%, of the amount you withdraw. You also might be slapped with a tax penalty of 10% if you pull money out before reaching age 59.5. A surrender charge or a tax penalty might end up watering down your payout amounts.
• Fees. An annuity provider normally tacks on fees for things like sales commissions. In addition, the provider might charge a fee for managing investments in a variable annuity. These fees might be subtracted from your annuity payouts or added to your annuity premiums.

How Much Income Does $100,000 Annuity Pay Out In The Future?

Many factors dictate how much income a $100,000 annuity will pay out in the future. But you can get an idea of how much your monthly payouts will be by doing some math.

Here, we’ll focus on a fixed annuity to illustrate how much a $100,000 annuity might pay out per month. This illustration assumes a one-time contribution of $100,000, a 6% interest rate and a payout period of 10, 15 or 20 years.

How To Calculate Annuity Payout

Here’s the formula for calculating an annuity payout.

P = (d[1-(1 + r/k)-nk])/(r/k)

• P: Balance of the annuity at the beginning of the payout period
• D: Regular withdrawal amount
• R: Annual interest rate in decimal form
• K: Number of compounding periods; since we are calculating monthly payouts, the number here is 12
• N: Number of years you plan to take withdrawals

Here’s how the formula looks with a $100,000 one-time contribution for a fixed annuity, a 6% interest rate and a 10-year, 15-year or 20-year payout period.

10-Year Payout Period

$100,000 = (d[1-(1 + 0.06/12)-10*12])/(0.06/12)

15-Year Payout Period

$100,000 = (d[1-(1 + 0.06/12)-15*12])/(0.06/12)

20-Year Payout Period

$100,000 = (d[1-(1 + 0.06/12)-20*12])/(0.06/12)

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