How Much Cash Can I Make Per Month With A $250,000 Annuity?

When planning for retirement, a $250,000 annuity can be a significant asset, offering a reliable income stream. The monthly income you can expect from such an annuity depends on various factors, including your age at the time of annuitization and the specifics of the annuity contract.

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Why Choose an Annuity with Lifetime Income?

Annuities with lifetime income withdrawals are appealing to those worried about outliving their savings. With studies showing a significant number of baby boomers at risk of depleting their retirement funds, annuities offer a sense of security by guaranteeing income for life.

Estimated Monthly Payments from a $250,000 Annuity

Using data from a Charles Schwab calculator, the estimated monthly payments from a $250,000 immediate, lifetime, fixed-income annuity vary based on age and the chosen payment option. Here’s a breakdown:

• At age 65, monthly payments range from $1,387 for a single life with cash refund to $1,465 for a single life-only option.

• For those aged 70, payments increase, ranging from $1,533 to $1,655.

• At age 75, the monthly income can be between $1,728 and $1,950.

• For 80-year-old annuitants, the range is $1,981 to $2,433.

• At age 85, the monthly payments are the highest, ranging from $2,297 to $3,233, depending on the selected option.

The terms and conditions of annuity contracts can vary significantly, influencing the exact monthly payment you receive. The examples provided offer a general guide, but individual circumstances and contract specifics will determine the exact amount.

Factors Impacting Annuity Payments

Interest Rate

The interest rate stipulated in your annuity contract is a primary determinant of your monthly payments. Higher interest rates generally lead to larger monthly payouts. This rate is agreed upon at the contract’s initiation and remains a pivotal factor throughout the annuity’s term.

Timing of Payments

Annuity contracts offer flexibility in terms of when you start receiving payments. Immediate annuities begin paying out soon after purchase, while deferred annuities delay payments until a specified future date. Opting for a deferred annuity usually results in higher monthly payments because of the accumulation period before disbursements begin.

Type of Annuity

Annuities come in various forms, primarily categorized as fixed or variable. Fixed annuities provide guaranteed returns and stable monthly payments, whereas variable annuities, tied to market performance, do not guarantee specific returns and can result in fluctuating income.

Addressing Insufficient Annuity Withdrawals

For many, a single annuity might not cover all living expenses, especially considering recent inflationary pressures. Social Security payments, which can start at age 62 and increase if delayed until age 70, provide an additional income stream. The average Social Security benefit is around $1,500 per month. However, this may still be inadequate for some, leading seniors to work beyond the traditional retirement age. 

Some alternative or supplementary income sources to consider that can build your nest egg include:

• Investing in stocks and real estate: Investing in stocks or real estate offers potential growth and income. Stocks can provide dividends and capital appreciation, while real estate investments, including real estate investment trusts (REITs), offer rental income and property value appreciation​​​​.

• Entrepreneurship and silent business partnership: Starting a business or becoming a silent partner in a startup presents an opportunity to get in on the ground level of potentially lucrative ventures. This option allows retirees to leverage their experience and invest in growing industries or innovative ideas.

• Fixed-income investments: Fixed-income investments, like bonds or fixed deposits, provide a steady stream of income. These options are generally lower risk compared to stocks and can offer a predictable return, making them a suitable choice for retirees seeking stability in their investment portfolios.

• Health savings accounts (HSAs): For those with high-deductible health plans, HSAs offer a unique way to save for retirement. Contributions are tax-deductible, growth is tax-free, and withdrawals used for qualified medical expenses are also tax-free. After age 65, funds can be withdrawn for any purpose without penalty, although they will be taxed if not used for medical expenses.

Long-Term Care and Special Withdrawals

Many annuities offer special withdrawal privileges for long-term care needs, supplementing lifetime income guarantees. These withdrawals, dependent on the duration of the annuity and when you become impaired, can significantly aid in covering long-term care expenses.

Is an Annuity with Lifetime Income Right for You?

Determining whether an annuity with lifetime income withdrawals is suitable depends on your retirement savings and goals. An annuity is one of several investment options, offering guaranteed income critical for a financial plan. A financial adviser can guide you through the best choices for your situation.

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