Annuities are an ideal option for investors seeking regular income in retirement. They pay out a fixed stream of payments on a monthly or annual basis that you can never outlive. Here’s how much you’d get per month if you invested $50,000.
A financial advisor could help you put a retirement plan together for your goals and needs.
Why Do Investors Buy Annuities?
One of the biggest fears for retirees is that they will run out of money before they pass away. While other investment options provide an uncertain future, annuities offer a guaranteed stream of income for the rest of your life. In some cases, couples buy annuities that continue providing income for the remainder of both investors’ lives. You can buy an annuity to provide an immediate stream of income. Or you can invest now and let the money grow until you need income in the future.
For investors who are not yet ready to retire, annuities offer tax-deferred growth on your contributions. Unlike a 401(k) or IRA, there are no annual maximum contribution limits or income requirements to worry about. You can contribute as much or as little as you’d like to an annuity.
Additionally, there are no required minimum distributions with annuities like there are with traditional retirement plans. That means that you can let your money continue to grow until you are ready to start making withdrawals.
Types of Annuities Affect Payment Amounts
There are numerous types of annuities available and each one can impact how much income you’ll receive in retirement. Here are six common types of annuities:
Immediate annuity. Investors contribute money and annuitize the balance to begin receiving payments immediately. Not all of the distributions are taxable because payments are a combination of interest and return of principal.
Deferred annuity. Contribute money today and let the money grow over time. The money grows tax-deferred until you start withdrawing it. Withdrawals start at some point in the future of your choosing.
Fixed annuity. Investors receive a fixed rate of interest for a specified period of time. Interest rates are similar to a bond or a certificate of deposit (CD). When that term expires, you can annuitize the balance, renew the contract, or transfer the money to another annuity.
Variable annuity. Contributions are invested into different sub-accounts that resemble mutual funds. Because the money is invested in the market, values may fluctuate and retirement income may not be guaranteed.
Life and period certain annuity. Period certain annuities continue making payments for a minimum period of time, even if the annuitant passes away before then. This feature addresses the concern of someone dying soon after annuitizing their account.
Life with cash refund. If you die after you start receiving monthly payments, your beneficiaries receive a refund of the unpaid premium amount.
How Much Does a $50,000 Annuity Pay Per Month?
When evaluating your investment options, it helps to understand how much money you’d receive if you bought a $50,000 annuity. The monthly income varies based on annuity type, gender, location, and age. This chart illustrates how much monthly income a $50,000 annuity would pay for a man living in California.
For Men Age 60 Age 65 Age 70 Age 75 Immediate Annuity $263 $296 $331 $388 Life & 10-Year Certain Annuity $269 $302 $336 $377 Life With Cash Refund $260 $290 $320 $360
Women have a longer life expectancy than men, so annuity companies expect to pay benefits over a longer period of time. Because of that, a woman’s annuity payments are lower. For the same criteria, notice how the monthly payments change for a woman.
For Women Age 60 Age 65 Age 70 Age 75 Immediate Annuity $251 $280 $308 $360 Life & 10-Year Certain Annuity $258 $288 $317 $354 Life With Cash Refund $252 $279 $305 $339
How much a $50,000 annuity pays also depends on which company you buy your annuity from. Each company uses different underwriting guidelines, interest rates, and life expectancy tables which affect your potential monthly income. It pays to shop around with the help of an experienced financial advisor to find the best deal.
Buying an annuity provides peace of mind and a guaranteed stream of income for the rest of your life. Investors often purchase an annuity to balance the uncertainty of their stock portfolio and supplement their Social Security income. So how much does a $50,000 annuity pay per month? It depends on many factors, including your age, gender, location, and the type of annuity that you purchase. To understand how an annuity fits into your investment strategy, discuss options with your advisor.
Tips for Creating Retirement Income
Reviewing annuity options can be a challenge for many investors. Financial advisors use their expertise to analyze the pros and cons of each type of annuity. Then, they share how each option affects your retirement strategy. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Retirees create multiple streams of income from various accounts. Sources include Social Security payments, stock dividends, bond and CD interest, and annuity payments. Our investment calculator forecasts how much money you’ll have in retirement to allocate among those investment accounts. Input your starting balance, ongoing contributions, timeframe, and investment returns to estimate your future nest egg.
Photo credit: ©iStock.com/damircudic, ©iStock.com/damircudic, ©iStock.com/witsarut sakorn