How Much Income Can You Get From an Annuity? A Detailed Look

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How much income will an annuity produce today? It's a straightforward question, but the answer gets a bit complicated.

However, it's just a matter of comparing and selecting annuity options, plugging in the right information, then shopping for the best deals.

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The amount of monthly income depends on:

Timing. You can choose payments to start now or in the future.

Age and gender of the annuitants (the individual or individuals who will receive the income) at the time payments start.

Policy features. Do you want your heirs to get cash back if you die before the annuity has repaid the premium deposit you paid? If so, you would choose the cash-refund option. Another key choice is whether you select a lifetime payout or a set term, such as 15 years.

Number of annuitants. Will the annuity cover one life or two (usually a husband and wife)?

The insurance company you choose. Life insurance companies underwrite annuities, and it's a competitive market. Some deals are significantly better than others.

Type of annuity. An income annuity is a contract that produces only income. This type produces the most income because it doesn't normally have any cash surrender value, and a portion of the payments during the initial years includes the return of your own money.

Annuities pay more now than they did a few years ago because interest rates have shot up. Insurers invest annuity premiums mostly in high-quality bonds, mortgages and dividend-paying stocks.

This article covers only income annuities. In my next article, I'll show how much income you can get from multi-year guaranteed annuities (MYGAs) and indexed annuities.

Below are some examples that should provide a good idea of how much income you can get in the current market.

Immediate income annuity examples

With an immediate annuity, you'll typically start receiving monthly payments within about a month of purchase, but you can delay them up to a year. The examples here assume you'll start payments immediately.

Here's what you can get, as of June 2025, for a $200,000 premium deposit of nonqualified funds (money that's not in your IRA or other qualified plan). These examples are based on the highest-paying companies in our database.

Single-life payout, lifetime annuity, male age 65, no cash-refund option

The monthly lifetime income is $1,314.39, which includes $481.06 of taxable income and $833.33 of nontaxable return of principal.

After 20 years, at age 85, he will have recouped his initial premium deposit, and the income will become fully taxable.

With the cash-refund option, the monthly income would be less — $1,256.36.

Lifetime payments are the most popular option for good reason: They provide longevity insurance. Payments continue at the same level for as long as you live, even after the insurance company has repaid the entire principal.

Sometimes, there's a good reason not to take lifetime payments and get a higher income for a shorter period. The buyer might know he'll get a large inheritance or be able to tap a generous pension within the next 10 years.

Instead of a lifetime annuity, he chooses a 10-year period-certain annuity, which would pay $2,067.56 a month.

This type of annuity guarantees income for the entire term. If he dies after six years, for example, his beneficiary will get the income for the remaining four years.

Joint-life payout, lifetime annuity, male age 65 / female age 65, no cash-refund option

With the joint-life option on a lifetime annuity, payments will continue as long as one spouse is alive. Monthly income is $1,151.48, of which $484.77 is taxable and $666.71 is nontaxable.

After 25 years (at age 90) the initial premium deposit will have been repaid, and payments will become fully taxable.

With the cash-refund option, monthly income would be $1,136.31.

Deferred income annuity examples

With a deferred income annuity, you can choose when you want your payments to start, as long as you begin taking them by age 85.

You'll get a larger income by deferring them, but, of course, you won't be collecting them for as long. Again, we're assuming nonqualified funds.

Single-life payout, lifetime annuity, male age 65, no cash-refund option, income deferred to age 75

Monthly lifetime income will be $3,124.36. This includes $1,791.03 of taxable income and $1,333.33 of nontaxable return of principal. After 12½ years, at age 87, he will have recouped his initial premium deposit, and the income will become fully taxable.

With the cash-refund option, monthly income would be $2,841.67.

Joint-life payout, lifetime annuity, male age 65 / female age 65, no cash-refund option, income deferred to age 75

Monthly lifetime income payment will be $2,359.77 ($1,349.67 taxable; $1,010.10 nontaxable).

After 16½ years (at age 91), the couple will have recouped their initial premium deposit, and payments will become fully taxable.

With the cash-refund option, monthly income would be $2,328.43.

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What about inflation?

Income annuities typically offer set payments, so there's a risk that future income might not be adequate many years from now if inflation runs high.

One way to counteract this is to buy a bigger benefit level, especially if you're choosing a deferred income annuity, in which the funds grow untouched until payments begin. That's the simplest approach.

Another way is to buy an inflation-adjusted annuity. You can buy a fixed annual percentage increase or choose an annuity that adjusts payments based on annual changes in the consumer price index.

Of course, in return for inflation protection, you'll get lower initial payments for the same deposit.

Joint-life payout, male age 65 / female age 65, no cash-refund option. Income deferred to age 75. Inflation-adjusted annuity that provides a 2% annual increase in the monthly income amount after payments have started.

Monthly lifetime income payment will start at $2,010.20 ($1,147.79 taxable; $862.41 nontaxable). After 20 years, at age 95, the monthly income amount will have grown to $2,987.05.

Joint-life payout, male age 65 /female age 65, no cash-refund option. Income deferred to age 75. Inflation-adjusted annuity that provides a 3% annual increase in the monthly income amount after payments have started.

Monthly lifetime income payment will start at $1,846.48 ($1,051.29 taxable; $795.19 nontaxable). After 20 years, at age 95, the monthly income amount will have grown to $3,334.95.

To determine if an inflation-adjusted income annuity is right for you, you need to make assumptions about your expected longevity.

You should also make a detailed analysis to compare a level-pay income annuity to an inflation-adjusted annuity to determine at what age the inflation-adjusted annuity crosses over and provides more total benefits.

Level-pay annuities typically look more attractive in the earlier years. But if you live a long life, the inflation-adjusted annuity can provide better total payouts if you're willing to wait that long.

As you can see, income annuities offer many options, and the payouts vary dramatically. These unique vehicles, especially lifetime annuities, can uniquely provide peace of mind and assurance that you'll never run out of money, no matter how long you live.

Ken Nuss is the founder and CEO of AnnuityAdvantage, a leading online provider of fixed-rate, fixed-indexed, and lifetime income annuities. He is a nationally recognized annuity expert and widely published author. A free rate comparison service with interest rates from dozens of insurers is available at www.annuityadvantage.com or by calling 800-239-0356. There are no fees or charges for the firm's services; 100% of the client's money goes to work for them in their annuity.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Retirement-income expert Ken Nuss is the founder and CEO of AnnuityAdvantage, a leading online provider of fixed-rate, fixed-indexed and immediate-income annuities. Interest rates from dozens of insurers are constantly updated on its website. He launched the AnnuityAdvantage website in 1999 to help people looking for their best options in principal-protected annuities. More information is available from the Medford, Ore., based company at www.annuityadvantage.com or (800) 239-0356.