Earlier than buying a $400,000 annuity, it is essential to have a transparent concept of what your month-to-month funds could possibly be.
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It is mid-2025, and there are numerous uncertainties looming in immediately’s financial panorama, from inflation to inventory market volatility and questions concerning the sustainability of the Social Safety program. Because of this, many retirees are searching for methods so as to add stability to their retirement plans through assured earnings choices that are not tied to the inventory market. And, a method to try this is thru an annuity, which is an insurance coverage product that helps bridge the hole between retirees’ financial savings and their month-to-month bills.
The attraction of an annuity is simple: With such a retirement software, you change a lump sum into assured month-to-month earnings that lasts so long as you reside. And, with rates of interest nonetheless comparatively excessive now, annuities are much more engaging. Elevated charges imply stronger payouts for brand new patrons, particularly these buying rapid annuities that begin paying instantly. So, for retirees of their 70s who wish to lock in earnings with out the stress of managing investments, this could possibly be a primary alternative.
However simply how a lot earnings are you able to anticipate from an annuity? Let’s break down what a $400,000 annuity may pay month-to-month in case you purchase one at age 70 — and what elements may trigger your verify to be greater or smaller.
Learn how so as to add an annuity to your retirement plan immediately.
How a lot will a $400,000 annuity pay month-to-month if purchased at age 70?
The month-to-month payout from a $400,000 rapid annuity bought at age 70 varies considerably primarily based on a number of key elements, together with your gender being probably the most impactful. This is what a single premium rapid annuity bought at age 70 immediately may pay every month, primarily based on an evaluation of Cannex information by Annuity.org:
Male, age 70: round $2,923 per monthFemale, age 70: round $2,763 per monthJoint life (each spouses age 70): round $2,449 per thirty days
This is why every determine differs — and why the numbers may look totally different relying in your private state of affairs:
Gender and life expectancy
Girls statistically stay longer than males, so annuity corporations pay them a barely decrease month-to-month quantity for a similar premium as a result of the funds are more likely to stretch over extra years.
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Single vs. joint life annuity
Single life annuities pay out till the unique annuitant passes away. Joint life annuities, then again, proceed funds to a surviving partner (or designated beneficiary) after one associate dies. Due to that added longevity safety, month-to-month checks are decrease, although they proceed so long as at the very least one particular person is alive.
Rate of interest setting
Annuity payouts are deeply influenced by present rates of interest as a result of the cash you hand over is invested by the insurer in bonds and different fixed-income securities. At the moment’s elevated rates of interest typically translate into stronger payouts for brand new annuities. If charges tighten additional or come down, although, the payouts on future annuity purchases could possibly be much less beneficiant.
Sort of annuity
Not all annuities are created equal. A hard and fast rapid annuity, which the above estimates assume, delivers a assured month-to-month verify for all times however would not account for inflation. Inflation‑adjusted annuities preserve tempo with the Client Worth Index however begin at a decrease preliminary payout for a similar premium. Then there are variable rapid annuities, the place your payout fluctuates primarily based on how the underlying investments carry out — which is riskier, however with upside potential.
Optionally available riders and ensures
Need the choice to go a demise profit to heirs? Or a value of residing rider? One thing that ensures a minimal fee even when the annuity’s underlying investments stumble? These additional options, or “riders,” will cut back your month-to-month earnings as a result of the insurer is assuming extra threat. In distinction, a straight, no-frills life annuity yields the best payout for the cash.
get the best month-to-month payout out of your annuity
In case your aim is to maximise the month-to-month earnings out of your $400,000 annuity, there are just a few strategic selections that may make a giant distinction, together with:
Go for a single-life annuity
If you happen to needn’t present for a partner or dependents after your demise, this selection gives essentially the most worth. Including joint protection or demise advantages can provide you peace of thoughts, however it would cut back your month-to-month verify.
Lock in when rates of interest are favorable
Shopping for when charges are elevated can lock in stronger funds for all times. If charges drop sooner or later, new patrons may see smaller month-to-month checks for a similar premium. If you happen to’re uncertain concerning the path of charges, a break up annuity technique (shopping for in phases) may assist you hedge your timing.
Skip the optionally available riders
Whereas tempting, add-ons like inflation changes, interval sure ensures, and demise advantages usually cut back your month-to-month earnings considerably. If you happen to’re centered strictly on maximizing earnings, it is usually finest to go along with essentially the most fundamental model of a right away annuity, which is simply pure month-to-month earnings for all times.
The underside line
A $400,000 annuity bought at age 70 can present significant month-to-month earnings starting from roughly $2,400 to $2,900, relying in your particular circumstances and the choices you select. However whereas this assured earnings stream gives helpful safety towards market volatility and the potential for outliving your financial savings, the fact is that annuities aren’t proper for everybody. As soon as you buy a right away annuity, your $400,000 is now not accessible as a lump sum, and you’ll’t change your thoughts in case your circumstances shift. So, be sure to do your homework, weigh the advantages and doable downsides and guarantee an annuity is smart in your retirement portfolio earlier than shopping for in.
Angelica Leicht