A common question for retirees and pre-retirees planning their financial future is simple but incredibly important: How much does an annuity pay? Whether you are evaluating a lump sum rollover, building a retirement income plan, or comparing options to Social Security and pensions, understanding how annuity payouts work is essential to making an informed decision.

Unlike market-based investments—where income depends on unpredictable performance—annuities create income using contractually guaranteed payout formulas backed by the financial strength of an insurance company. This allows you to estimate your income years in advance, protect it from market declines, and customize it to your retirement goals. In retirement planning, predictability is power—and annuities give you the ability to convert a lump sum into a lifelong stream of guaranteed income.

At Diversified Insurance Brokers, we help retirees analyze exactly how much income their annuity will generate, how that income compares across the top-rated annuity carriers, and how those payouts should be coordinated with Social Security, investment accounts, and pensions. This guide explains how annuity payments work, what determines payout amounts, how much you can expect at different ages, and how to compare annuity income options.

How Much Does an Annuity Pay? Understanding the Foundation

Annuity payments depend on several factors, including your age, the size of your premium, the type of annuity, whether you choose single-life or joint-life income, and whether you want features such as inflation increases or guaranteed periods. The most important factor is age: the older you are when income begins, the higher the payout. This is because the insurance company is guaranteeing income for a shorter expected timeframe.

For example, a 65-year-old purchasing an immediate annuity typically receives higher monthly payments than a 60-year-old with the same premium. Those payouts may rise even more if income is deferred for several years. Additionally, adding a spouse to the income (joint-life) may reduce payments slightly, since the insurer guarantees income for two lifetimes instead of one.

It’s also important to understand the difference between annuitization and guaranteed lifetime withdrawal benefits (GLWBs). Annuitization is a traditional payout method where your contract is converted into irrevocable income. GLWBs, on the other hand, allow guaranteed lifetime withdrawals without giving up access to your account value or liquidity features. The payout amounts may differ, but the most attractive feature for many retirees is the guaranteed income for life without market risk.

How Insurance Companies Determine Annuity Payments

Annuity payouts are not guesses—they’re built on actuarial science. Insurance companies calculate income based on life expectancy tables, interest rate environments, future reserve obligations, and contract features. Lifetime income riders may include roll-up rates, bonuses, or guaranteed growth applied to a benefit base, which is then multiplied by a payout percentage tied to your age when income begins.

For example, if your income base grows to $300,000 and your age-based payout factor is 5.5%, your lifetime annual income would be $16,500. Some contracts increase this income with deferral bonuses or annual step-ups, meaning your payout percentage increases each year you wait to take income.

The ability to delay income is one of the most powerful levers you have. In many cases, waiting even a single year can significantly increase your guaranteed income. Higher interest rates can also strengthen payout amounts, which is one reason today’s annuity environment is especially attractive for new retirees.

How Much Can a Lump Sum Pay in Lifetime Income?

Every retiree’s situation is different, but here are general ranges commonly seen among today’s leading carriers:

• A $100,000 premium may generate $5,500 to $7,500 per year at age 65.
• A $250,000 premium may generate $14,000 to $18,500 per year at age 65.
• A $500,000 premium may generate $28,000 to $37,000 per year at age 65.

These are general ranges, and actual payouts depend on the specific annuity product and features you choose. Bonus annuities, income riders with high roll-up rates, and contracts offering enhanced growth may produce significantly higher lifetime income, especially if income is deferred for several years.

The easiest way to see your personalized income is with a lifetime income calculator—which shows payouts instantly based on your age and premium.

Lifetime Income Calculator

Why Annuity Income Often Outperforms the 4% Rule

Many retirees are familiar with the traditional “4% rule,” which is a guideline suggesting that you can withdraw 4% of your investment portfolio each year without running out of money. However, this rule has become less reliable due to market volatility, inflation, and longer life expectancies. In contrast, annuities are built specifically to provide income you cannot outlive—making them ideal for the portion of your retirement plan dedicated to essential expenses.

Insurance companies can offer stronger payouts than the 4% rule because they pool longevity risk across thousands of policyholders. This gives them the ability to pay lifetime income that would not be sustainable using traditional investment withdrawals. This is why annuities remain one of the most powerful tools for anyone seeking predictable, stable income in retirement.

How to Choose the Right Income Option

Choosing how much an annuity should pay is really about choosing the income structure that fits your retirement goals. If you want the highest possible payout, a single-life immediate annuity may offer the most income—but it ends when you pass away. If you want to protect a spouse, a joint-life payout ensures that income continues for both of you. If liquidity matters, a GLWB rider lets you keep access to your money while still receiving guaranteed lifetime income.

Some retirees want income that begins immediately. Others prefer a deferred income strategy because their Social Security or pension already covers essential needs. And then some retirees want inflation protection either through indexed growth or contractually guaranteed increases. All of these factors influence how much the annuity will ultimately pay.

Coordinating Annuity Income With Your Full Retirement Plan

The most successful retirement income plans combine multiple streams: Social Security, annuity income, savings withdrawals, and sometimes pension benefits. Annuities help create the foundation—your guaranteed income floor. Once this foundation is secured, market-based investments can be used for discretionary spending, growth, or legacy planning without fear that a downturn will disrupt monthly income.

Many retirees also use annuity income to reduce required withdrawals from IRAs and 401k accounts, extending the life of their investment portfolios. Coordinating these pieces is one of the most important steps in building a stable long-term plan.

How Diversified Insurance Brokers Helps You Compare Income Options

Annuity income can vary significantly depending on the carrier and contract. As an independent nationwide agency, Diversified Insurance Brokers compares dozens of annuity companies to find the strongest payouts at your age. We review your goals, timeline, premium amount, liquidity needs, and whether joint-life or single-life income is most appropriate.

We also help coordinate annuity income with your Social Security timing, long-term care planning, and withdrawal strategies—ensuring your retirement income is predictable, efficient, and protected from market volatility.

Related Pages

• How Do Annuities Earn Interest?
• Do Annuities Have Fees?
• What Is a GLWB?
• How Does a Fixed Indexed Annuity Work?
• Best Indexed Annuities for Income