Annuities are an ideal option for investors seeking regular income in retirement. They pay a fixed stream of payments on a monthly or yearly 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 together a retirement plan that fits your goals and needs.
Why do investors buy annuities?
One of the biggest fears for retirees is running out of money before they die. While other investment options predict an uncertain future, annuities offer a guaranteed income stream for the rest of your life. In some cases, couples purchase annuities that continue to provide income for the rest of both investors’ lives. You can purchase an annuity to provide an immediate income stream. Or you can invest now and let the money grow until you need income in the future.
For investors who aren’t quite ready to retire, annuities offer tax-deferred growth on contributions. Unlike a 401(k) or IRA, there are no maximum annual contribution limits or income requirements to worry about. You can contribute as much or as little as you like to an annuity.
Additionally, annuities do not require minimum distributions as is the case with traditional pension plans. This means you can let your money continue to grow until you’re ready to start making withdrawals.
Annuity types affect payment amounts
There are numerous types of annuities available, and each can affect the amount of income you receive in retirement. Here are six common types of annuities:
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Immediate income. Investors contribute money and report the balance to start receiving payments immediately. Not all distributions are taxable because the payments are a combination of interest and return of principal.
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Deferred annuity. Contribute money today and let the money grow over time. The money grows in a deferred manner until you start withdrawing it. Withdrawals will begin at some point in the future of your choosing.
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Fixed income. Investors receive a fixed interest rate for a specified period of time. The interest rates are similar to those of a bond or certificate of deposit (CD). At the end of this period, you can annuitize the balance, renew the contract or transfer the money to another annuity.
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Variable annuity. Contributions are invested in several subaccounts that resemble mutual funds. As money is invested in the market, values may fluctuate and retirement income may not be guaranteed.
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Life and period of certain income. Period: Some annuities continue to make payments for a minimum period of time, even if the annuitant dies before then. This feature addresses the concern of someone dying soon after annuitizing their account.
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Life with cash back. If you die after starting to receive monthly payments, your beneficiaries receive a refund of the unpaid premium amount.
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How much does a $50,000 per month annuity pay?
When evaluating your investment options, it’s helpful to understand how much money you would receive if you purchased a $50,000 annuity. Monthly income varies based on annuity type, gender, location and age. This graph 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 Age Immediate Annuity $263 $296 $331 $388 Life and 10 Year Certain Annuity $269 $302 $336 $377 Cash Back Life $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 this, a woman’s annuity payments are lower. For the same criteria, note how the monthly payments change for a woman.
For Women Age 60 Age 65 Age 70 Age 75 Age Immediate Annuity $251 $280 $308 $360 Life and 10 Year Certain Annuity $258 $288 $317 $354 Cash Back Life $252 $279 $305 $339
How much a $50,000 annuity pays also depends on the company you purchase the annuity from. Each company uses different underwriting guidelines, interest rates, and life expectancy tables that impact your potential monthly income. It’s worth shopping around with the help of an experienced financial advisor to find the best deal.
Bottom line
Purchasing an annuity provides peace of mind and a guaranteed income stream 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 per month annuity pay? It depends on many factors, including age, gender, location and type of annuity purchased. To understand how an annuity fits into your investment strategy, discuss your options with your advisor.
Tips for Creating Retirement Income
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Reviewing annuity options can be a challenge for many investors. Financial advisors use their experience to analyze the pros and cons of each type of annuity. Then, they share how each option impacts your retirement strategy. The free SmartAsset tool it matches you with up to three financial advisors who serve your area, and you can interview your advisors for free to decide which one is right for you. If you’re ready to find an advisor who can help you reach your financial goals, it begins now.
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Retirees create multiple streams of income from various accounts. Sources include Social Security payments, stock dividends, interest on bonds and CDs, and annuity payments. Our investment calculator predicts how much money you will have in retirement to allocate between these investment accounts. Enter your starting balance, ongoing contributions, time period and investment returns to estimate your future nest egg.
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