How much income will an annuity produce today? It’s a straightforward question, but the answer gets a bit complicated. However, it’s not rocket science. It’s just a matter of comparing and selecting annuity options, plugging in the right information, and then shopping the market for the best deals.
The amount of monthly income depends on:
- Whether you choose payments starting now or sometime in the future.
- Age and sex of the annuitants (the person or persons who will receive the income) at the time the payments start.
- Policy features. Do you want your heirs to get cash back in case you die before the annuity has repaid the premium deposit you paid? If so, you would choose the cash-refund option. Another key choice is whether you select a lifetime payout or a set term, such as 15 years.
- Whether the annuity covers one life or two, usually a husband and wife.
- The insurance company you choose. Life insurance companies underwrite annuities. It’s a competitive market. Some deals are significantly better than others.
- Annuity type. An income annuity is a contract that produces only income. This type produces the most income because it doesn’t normally have any cash surrender value, and a portion of the payments during the initial years includes the return of your own money.
Annuities pay more now than they did a few years ago because interest rates have shot up. Insurers invest annuity premiums mostly in high-quality bonds, mortgages and dividend-paying stocks. This article covers only income annuities. In my next article, I’ll show how much income you can get from indexed annuities.
Below are some examples that should provide a good idea of how much income you can get in the current market.
Immediate income annuity examples
With an immediate annuity, you’ll typically start receiving monthly payments within about a month of purchase, but you may delay them up to a year. The examples below assume you’ll start payments ASAP.
Here’s what you can get, as of June 2025, for a $200,000 premium deposit of nonqualified funds (money that’s not in your IRA or other qualified plan). These examples are based on the highest-paying companies in our database.
Single-life payout, lifetime annuity, male age 65. No cash-refund option
Monthly lifetime income is $1,314.39. This includes $481.06 of taxable income and $833.33 of nontaxable return of principal. After 20 years, at age 85, he will have recouped his initial premium deposit, and the income will become fully taxable.
With the cash-refund option, the monthly income would be less, $1,256.36.
Lifetime payments are the most popular option for good reason. They provide longevity insurance. The payments continue at the same level as long as you live, even after the insurance company has repaid the entire principal.
Sometimes, there’s a good reason not to take lifetime payments and get a higher income for a shorter period. Suppose the buyer knows he’ll get a large inheritance or be able to tap a generous pension within the next 10 years.
Instead of a lifetime annuity, he chooses a 10-year period-certain annuity. It would pay $2,067.56 a month. This type of annuity guarantees income for the entire term. If he dies after six years, for example, his beneficiary will get the income for the remaining four years.
Joint-life payout, lifetime annuity, male age 65 / female age 65. No cash-refund option
With the joint-life option on a lifetime annuity, payments will continue as long as one spouse is alive. Monthly income is $1,151.48, of which $484.77 is taxable and $666.71 is nontaxable.
After 25 years (at age 90) the initial premium deposit will have been repaid, and payments will become fully taxable.
With the cash-refund option, monthly income would be $1,136.31.
Deferred income annuity examples
With a deferred income annuity, you can choose when you want your payments to start, as long as you begin taking them by age 85. You’ll get a larger income by deferring them, but, of course, you won’t be collecting them as long. Again, we’re assuming nonqualified funds.
Single-life payout, lifetime annuity, male age 65, no cash-refund option. Income deferred to age 75.
Monthly lifetime income will be $3,124.36. This includes $1,791.03 of taxable income and $1,333.33 of nontaxable return of principal. After 12.5 years, at age 87, he will have recouped his initial premium deposit, and the income will become fully taxable.
With the cash-refund option, monthly income would be $2,841.67.
Joint-life payout, lifetime annuity, male age 65 / female age 65, no cash-refund option. Income deferred to age 75.
Monthly lifetime income payment will be $2,359.77 ($1,349.67 taxable; $1,010.10 nontaxable).
After 16.5 years (at age 91), the couple will have recouped their initial premium deposit, and payments will become fully taxable.
With the cash-refund option, monthly income would be $2,328.43.
What about inflation?
Income annuities typically offer set payments, so there’s a risk that future income may not be adequate many years from now if inflation runs high.
One way to counteract this is to buy a bigger benefit level, especially if you’re choosing a deferred income annuity, where the funds grow untouched until payments begin. That’s the simplest approach.
Another way is to buy an inflation-adjusted annuity. You can buy a fixed annual percentage increase or choose an annuity that adjusts payment based on annual changes in the consumer price index. Of course, in return for inflation protection, you’ll get lower initial payments for the same deposit.
Joint-life payout, male age 65 / female age 65, no cash-refund option. Income deferred to age 75. Inflation-adjusted annuity that provides a 2% annual increase in the monthly income amount after payments have started.
Monthly lifetime income payment will start at $2,010.20 ($1,147.79 taxable; $862.41 nontaxable). After 20 years, at age 95, the monthly income amount will have grown to $2,987.05.
Joint-life payout, male age 65 /female age 65, no cash-refund option. Income deferred to age 75. Inflation-adjusted annuity that provides a 3% annual increase in the monthly income amount after payments have started.
Monthly lifetime income payment will start at $1,846.48 ($1,051.29 taxable; $795.19 nontaxable). After 20 years, at age 95, the monthly income amount will have grown to $3,334.95.
To determine if an inflation-adjusted income annuity is right for you, you need to make assumptions about your expected longevity. Additionally, you should make a detailed analysis to compare a level-pay income annuity to an inflation-adjusted annuity to determine at what age the inflation-adjusted annuity crosses over and provides more total benefits.
Level-pay annuities typically look more attractive in the earlier years. But if you live a long life, the inflation adjusted annuity can provide better total payouts, if you’re willing to wait that long.
As you can see, income annuities offer many options, and the payouts vary dramatically. These unique vehicles, especially lifetime annuities, can uniquely provide peace of mind and assurance that you’ll never run out of money, no matter how long you live. June is Annuity Awareness Month, and being aware of your options is always a good thing.
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Ken Nuss is the founder and CEO of AnnuityAdvantage, a leading online provider of fixed-rate, fixed-indexed, and lifetime income annuities. Ken is a nationally recognized annuity expert and widely published author. A free rate comparison service with interest rates from dozens of insurers is available at www.annuityadvantage.com or by calling (800) 239-0356. There are no fees or charges for the firm’s services; 100% of the client’s money goes to work for them in their annuity.
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