Immediate annuity monthly income.

What an immediate annuity actually is

A Single Premium Immediate Annuity (SPIA) is a contract with an insurance carrier. The client pays a lump-sum premium, and the carrier converts that premium into a stream of guaranteed payments that begin within about 30 to 365 days. The payments continue for the life of the annuitant, for a stated period, or for both, depending on the payout option elected at issue. Once issued, a traditional SPIA is not liquid and cannot be surrendered for its original premium.

How the payout is calculated

Carriers price a SPIA using three inputs: expected mortality (from their own experience tables), current interest rates on the assets backing the block of business, and the guarantee cost of the payout option elected. Older annuitants receive higher payouts because expected payment periods are shorter. Males receive slightly higher payouts than females at the same age. Period- certain and joint-life elections lower the payout because they extend the carrier's guarantee.

Payouts are typically quoted as monthly dollars per $100,000 of premium. In the current rate environment, a 65-year-old life-only quote is roughly $620 per month per $100,000 for a male and $595 for a female. A 70-year-old quote is roughly $700 per month per $100,000. These are averages across major carriers; individual quotes move with interest rates and vary by state and carrier.

Payout options and what they cost

• Life only: highest monthly payout. Payments stop at the annuitant's death with no residual guarantee.
• Life with 10-year certain: about 5% less monthly income. If the annuitant dies inside 10 years, remaining payments continue to the beneficiary through year 10.
• Life with 20-year certain: about 12-15% less monthly income. Same idea, longer guarantee.
• Joint and 100% survivor: about 15% less monthly income than single life. Payments continue at 100% for the surviving annuitant. Also available at 75% and 50% survivor levels.
• Installment refund and cash refund: guarantees that the total payments will at least equal the original premium if the annuitant dies early.

Taxes on SPIA payments

Non-qualified SPIAs (funded with after-tax dollars) use the exclusion ratio from IRS Publication 939 to split each payment between a tax-free return of principal and taxable interest, based on the annuitant's life expectancy at issue. Once the entire cost basis has been recovered, subsequent payments are fully taxable. Qualified SPIAs (funded from a traditional IRA or 401(k)) are fully taxable as ordinary income, and the annuitized payments satisfy the RMD obligation for the annuitized portion.

When a SPIA fits the plan

The strongest case for an immediate annuity is the base-need portion of retirement income. Social Security and any pension cover part of the floor; a SPIA can fill the rest of the essential expense line. That approach frees the balance of the portfolio to be invested for growth and legacy, since day-to-day spending no longer depends on market returns. SPIAs also protect against longevity risk directly: the paycheck continues as long as the annuitant does.

The tradeoff is liquidity and legacy. A traditional SPIA is a permanent decision, and life-only payouts leave nothing to heirs. Sizing matters: annuitizing too much of the portfolio removes flexibility that most retirees eventually need.

How to read this estimate

This calculator uses typical current-market payout anchors and adjusts for age, gender, and payout option. Real carrier illustrations will differ, sometimes materially, based on the rate environment at the time of quote, the specific carrier's pricing, funding source, state of issue, and any riders. Use this page to frame the conversation; use a live carrier quote to commit.