Here's what a $250,000 annuity could pay you each month

While inflation has been cooling, the higher prices of essentials are still weighing on household budgets after years of sticky inflation, and other economic hurdles and uncertainties are also looming, adding to the financial struggles people are facing right now. And, when you factor in the recent stock market downturns, which have been making even seasoned investors uneasy, it's easy to see why many seniors and soon-to-be retirees are looking for ways to add predictable income streams to their retirement plans. 

That, in turn, has led to renewed interest in a unique solution: annuities. These financial products offer something that's hard to find elsewhere: monthly payments you can count on, no matter how long you live or what the markets do. At their core, annuities turn a lump sum of money into a steady income stream, which is a powerful value proposition for those approaching retirement age, especially when savings are limited and the goal is to stretch those dollars as far as possible. 

But knowing exactly what you'll get back in return is an important part of determining whether an annuity aligns with your retirement plans. So what can you expect if you're planning to invest $250,000 in an annuity? Below, we'll take a closer look at how much the monthly payments would be and explore how to make the most of your investment.

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Here's what a $250,000 annuity could pay you each month

Right now, a $250,000 annuity could generate monthly payments ranging from about $1,200 to more than $2,600, based on Cannex market data analyzed by Annuity.org. This monthly payment range reflects how dramatically payments can vary depending on your age, gender and contract structure. Here are a few examples of what that could look like:

• A 60-year-old man with a $250,000 immediate fixed annuity could expect monthly payments of $1,476 currently. A woman of the same age with the same annuity could expect to receive slightly less ($1,430) each month due to a longer projected life expectancy.
• A 65-year-old man purchasing a $250,000 immediate fixed annuity could receive about $1,675 per month for life. The monthly payments for a 65-year-old woman with the same fixed annuity would be $1,550 per month currently, or about $125 less per month.
• A 70-year-old man who purchased a $250,000 annuity right now could expect monthly payments of $1,826 in return. A woman with the same contract might get around $1,726 monthly, or about $100 less.
• For those who are older when they begin taking payments — say, 75 or 80 — the monthly payouts increase, since the insurance company expects to pay over a shorter time frame. A 75-year-old man, for instance, could collect $2,134 per month.

The numbers shift further if you select a joint life annuity, which continues payments as long as either you or your spouse is alive. That added security often results in lower monthly income. For example, a joint life annuity for a couple purchased at age 60 would pay out an average of $1,315 per month right now — over $100 less than it would otherwise pay on a single policy for a man or woman of the same age.

If you decide to defer payments for several years to give the principal time to grow, though, your future monthly annuity income could rise considerably. But you'll need to factor in how long you're comfortable waiting before you begin receiving payouts. And, other factors, like adding guarantees or inflation riders to your policy, can also impact the amount of the monthly payouts, as can the interest rate environment. If rates are elevated, insurers will typically offer higher monthly payments, but if rates are low, the monthly annuity payments tend to be lower, too. 

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How to make the most of your annuity investment

Selecting the right annuity for your $250,000 investment is important, as it directly impacts your monthly payment, but it also requires careful consideration of both your immediate needs and long-term goals. Before committing to any annuity contract, consider these strategies to maximize your investment:

Shop around for the best rates: Annuity payouts can vary significantly between providers. Taking the time to compare quotes from multiple highly-rated insurance companies can result in substantially higher monthly payments over the life of your annuity.

Consider a laddering strategy: Rather than putting your entire $250,000 into a single annuity, you might divide it among multiple smaller annuities purchased at different times. This approach can help you benefit from potential future interest rate increases while still securing some income now.

Assess your health and family history: Insurance companies base their payout calculations on average life expectancies, but your personal health situation and family longevity history might suggest a different outlook. If you have health concerns that might shorten your life expectancy, certain annuity types might provide better value.

Balance guaranteed income with flexibility: While annuities provide income security, they typically limit access to your principal. Consider keeping some of your retirement savings in more liquid investments to maintain financial flexibility for unexpected expenses or opportunities.

Understand tax implications: Different annuity types have varying tax consequences. For non-qualified annuities, a portion of each payment represents a return of your principal and is tax-free, while the remainder is taxable as ordinary income. 

The bottom line

A $250,000 annuity can be a powerful way to lock in monthly income during your retirement years, but the amount you'll receive each month varies widely based on your personal details and the product you choose. Right now, you could expect anywhere from roughly $1,200 to over $2,600 per month, depending on factors like your age, gender and the annuity structure. 

So, before purchasing an annuity, take time to understand all contract terms and compare options from multiple providers. With this type of careful consideration, an annuity can be a valuable tool for creating the stable income you need for a secure and comfortable retirement.