I’d like to buy an immediate annuity that provides $1,700 in income per month for life. Together with my monthly Social Security benefits, that should be enough to cover my regular expenses in retirement. How much will I need to invest? I am 65 years old.
Annuity payout rates are determined by your age at time of purchase and prevailing interest rates. Right now, a 65-year-old man would have to invest about $268,000 in an immediate annuity to provide $1,700 per month for the rest of his life. A 65-year-old woman, because of her longer life expectancy, would have to pay about $288,000 for the same monthly payout. A 65-year-old couple would have to pay about $317,000 for an annuity that continues to pay out $1,700 per month for as long as either one of them lives. You can look up the best annuity quotes from top companies at ImmediateAnnuities.com, which shows how much you’d need to invest to provide a certain monthly payout. You can also use the calculator on the site to see how a particular lump sum would translate into a monthly income stream. The older you are, the higher the payouts.
With a fixed immediate annuity, payouts remain level for life, so they will lose purchasing power to inflation over time. Several insurers offer immediate annuities that increase their payouts each year, either based on the consumer price index or by a fixed inflation amount, such as 2% or 3% per year. However, the initial payouts tend to start at about 25% to 30% less than fixed-payout annuities that cost the same. But if you live beyond your life expectancy, you’ll come out ahead with an inflation-adjusted annuity.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For example, a 65-year-old man who invests $100,000 in a New York Life immediate annuity without an inflation adjustment could get $6,930 a year for the rest of his life. Or he could buy an annuity with a 3% annual increase, which would start with an annual payout of $5,168 at age 65, growing to $6,743 by age 75, $7,818 by 80 and $9,063 by age 85.
For more information about immediate annuities, see Lock In Your Retirement Income.
-
Stock Market Today: Stocks Rally Despite Rising Geopolitical TensionThe main indexes were mixed on Tuesday but closed well off their lows after an early flight to safety.
-
What's at Stake for Alphabet as DOJ Eyes Google's ChromeAlphabet is higher Tuesday even as antitrust officials at the DOJ support forcing Google to sell its popular web browser. Here's what you need to know.
-
Credit Report Error? They All Mattercredit & debt Don't dismiss a minor error. It could be the sign of something more serious.
-
Insurance for a Learning Driverinsurance Adding a teen driver to your plan will raise premiums, but there are things you can do to help reduce them.
-
Getting Out of an RMD Penalty
retirement When your brokerage firm miscalculates your required minimum distributions, you have recourse.
-
529 Plans Aren’t Just for Kids529 Plans You don’t have to be college-age to use the money tax-free, but there are stipulations.
-
When to Transfer Ownership of a Custodial Accountsavings Before your child turns 18, you should check with your broker about the account's age of majority and termination.
-
Borrowers Get More Time to Repay 401(k) Loans
retirement If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.
-
When It Pays to Buy Travel Insurance
Travel Investing in travel insurance can help recover some costs when your vacation gets ruined by a natural disaster, medical emergency or other catastrophe.
-
It’s Not Too Late to Boost Retirement Savings for 2018
retirement Some retirement accounts will accept contributions for 2018 up until the April tax deadline.
