How Much Does a $200,000 Annuity Pay Per Month?
An annuity can be an appealing option to build your retirement nest egg. Adding guaranteed retirement income to your retirement can give you financial stability. But the exact amount that you’ll get from an annuity each month will vary. Let’s break down how much a $200,000 annuity will pay you each month. A financial advisor could help put a financial plan together for your retirement needs and goals.
What Is an Annuity?
An annuity is a deal where you give money to an insurance company, and they pay you a steady amount each month.In some cases, you’ll provide all of the funds upfront. In others, you’d make the payments to your insurance company over a long period of time.
Once you invest the money, the insurance company pays you a set amount regularly for a set period. Most people who purchase annuities use the funds as an additional stream of income for retirement. But retirement is not a requirement. You can buy an annuity if you want a guaranteed source of income for any situation.
Factors That Impact Payments – Retirement Planning
The exact amount that you can expect from a $200,000 annuity will vary based on three factors:
- The interest rate: When you sign up for an annuity, you’ll see an interest rate defined in the contract. You’ll want to lock in a high interest rate for higher payments.
- When you want the payments: You can choose between an immediate annuity or a deferred annuity. An immediate annuity kicks in right away. But you’ll typically see a higher monthly payment with a deferred annuity.
- Type of annuity: The monthly payment you get from an annuity may or may not fluctuate. If you sign up for a fixed annuity, you’ll lock in guaranteed monthly payments. If you sign up for a variable annuity, you won’t find guaranteed monthly payments. Variable annuities are usually tied to market factors. So, if interest rates rise, your monthly payout might go up.
The table below gives examples of what a $200,000 immediate, lifetime, fixed-income annuity would pay, for annuitants of several ages. The figures derive from a Charles Schwab calculator.
| Estimated Monthly Payments of a $200,000 Annuity | ||||
| Age | Single Life Only | Single Life + 10-Year Certain | Single Life + 20-Year Certain | Single Life + Cash Refund |
| 85 | $2,586 | $1,809 | $1,203 | $1,836 |
| 80 | $1,945 | $1,632 | $1,197 | $1,542 |
| 75 | $1,551 | $1,435 | $1,173 | $1,335 |
| 70 | $1,294 | $1,254 | $1,118 | $1,179 |
| 65 | $1,132 | $1,116 | $1,045 | $1,067 |
The unique details of your annuity will determine the monthly payout. Take the time to closely review the information in your annuity contract to make sure that your payment is what you want it to be.
Should You Get an Annuity?
Depending on your financial circumstances, an annuity could be a reliable stream of income for your retirement. One of the factors to consider is the need for reliable income. A fixed annuity provides a reliable income stream whether or not you are retired. A second factor to consider is your expected longevity. If you expect to live a long time, an annuity can help you support yourself during that time. A third factor has to do with how engaged you want to be in managing your finances. An annuity sends a monthly payment to you every month. You won’t have to monitor investments, rebalance a portfolio or manage tenants to receive this income.
- High fees: Unfortunately, most Retirement Planning annuities have high fees involved. If you want to avoid fees, choosing another investment is the way to go.
- No access to the principal: Once you sign up for an annuity, you won’t be able to pull out your funds. So, if a major expense comes up, this principal is inaccessible.
- Other savings priorities: If you want to save for other things, the cost of an annuity may be too high.
Bottom Line
An annuity can be a useful Retirement Planning investment option that adds value to your retirement. But it’s not the right choice for everyone. Depending on your financial circumstances you may want to also consider other options. If you can’t decide whether or not an annuity is right for you then it’s time to talk to a financial advisor. They can help you look at your whole financial situation to see how an annuity might fit in.
Retirement Tips
- Work with a financial advisor to create a good retirement plan. SmartAsset’s free tool connects you with up to three financial advisors in your area. You can interview these advisors for free to find the best fit for you. If you want to find an advisor to help you reach your financial goals, get started now.
- Saving for retirement begins with knowing how much to save. SmartAsset’s free retirement calculator can show you how much you should save.
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