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How Much Income Will a $250k Annuity Pay Per Month?

How Much Income Will a $250k Annuity Pay Per Month?

Many clients come to us with a retirement account, like a 401k or IRA, and they need to make that money last. It’s usually worth exploring an annuity with lifetime income withdrawals.

Today, we’re tackling a common example: how much income would a $250,000 annuity pay per month?

Note: please bear in mind that this is not meant as individual financial advice. The information we’re sharing is intended to help educate. Your situation is unique. You should always receive a personalized approach that takes your circumstances into account before making financial or retirement decisions. For that, we invite you to schedule an appointment with a licensed sales agent.

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Why choose an annuity with lifetime income?

Some types of annuities come with lifetime withdrawals, which means your annuity will pay you for the rest of your life.

This is especially attractive for individuals who are worried they will outlive their retirement savings. And that worry, in some cases, is founded in reality.

According to a recent study, many baby boomers could outlive their 401(k) funds, with many completely depleting their retirement savings by age 85 (Center for Retirement Research at Boston College Fund).

And a Northwestern Mutual study found that on average, people think there’s a 45% chance they’ll outlive their savings.

An annuity that allows you to withdraw income – which is guaranteed for life – can ease those concerns and provide retirees with a solid plan.

How much income can a $250k annuity pay me per month?

Let’s say you have $250,000 saved up in your nest egg, and you want to get income from it for life.  

If you deposit these funds at age 65, you can start withdrawing in the second year. How much depends on how the annuity performs, but you are guaranteed at least $12,854 per year, for life.

Disclaimer: Exact amounts can potentially vary – please contact us for an illustration.

However, if the annuity performs as expected (based on data from the last 10 years), your annual withdrawals could range from $13,721-$22,948 per year, if you lived to age 95. Those withdrawal amounts would slowly rise every year as your initial annuity deposit grows.

As an example, your annual withdrawal at age 68 could be around $15,000, and by age 80, that withdrawal could be around $18,000.

In sum, a $250,000 annuity could realistically pay you from $1,071 (guaranteed) up to $1,912 (non-guaranteed) per month.

What if my annuity withdrawals aren’t enough to live on?

A single annuity may not provide enough lifetime income for you to live comfortably and pay all of your bills. With the recent effects of inflation, many retirees are more concerned than ever about falling short financially.

Don’t forget about Social Security payments, which you can start taking at age 62. However, if you delay taking benefits up to age 70, your benefit amount will increase.

The average Social Security retirement benefit is around $1,500 per month. You can use this quick calculator to get a rough idea of what your Social Security monthly benefit amount will be.

In some cases, this still isn’t enough to live on, which is why many seniors continue to work past the traditional retirement age of 65. According to the Bureau of Labor Statistics (BLS), in 2020, over 10 million people were still in the workforce over age 65.

What if I need long-term care?

Aside from lifetime income guarantees, many annuities also come with special withdrawal privileges if you need long-term care.

To be eligible for these special withdrawals, you must not be able to perform at least two of the six Activity of Daily Living. These withdrawals go above and beyond your lifetime withdrawals, and they can help you pay for services like long-term care and home health care.

The exact amount of these withdrawals will depend on how long you’ve had the annuity and when you become impaired. Our licensed sales agents can provide you with an illustration that will help you estimate these special withdrawal privileges.

Is an annuity with lifetime income right for me?

If you have retirement savings, an annuity with lifetime income withdrawals could be right for you.  

Our licensed sales agents can run an illustration for you, which will allow you to see what your monthly income could be.

Schedule an appointment today to get started!

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Disclaimer: We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.