How Much Money Do You Need to Start an Annuity?

The amount you invest into an annuity depends on the type of annuity you want and the goals you want to achieve. You can open a fixed annuity for as little as $2,500 to $5,000 with continuing premium payments or you can start an immediate annuity for as low as $25,000.

Terry Turner, Financial writer for
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    Terry Turner

    Terry Turner

    Senior Financial Writer and Financial Wellness Facilitator

    Terry Turner is a senior financial writer for He holds a financial wellness facilitator certificate from the Financial Wellness Foundation and the National Wellness Institute, and he is an active member of the Association for Financial Counseling & Planning Education (AFCPE®).

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  • Updated: September 14, 2022
  • This page features 7 Cited Research Articles
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APA Turner, T. (2022, September 14). How Much Money Do You Need to Start an Annuity? Retrieved September 22, 2022, from

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Chicago Turner, Terry. "How Much Money Do You Need to Start an Annuity?" Last modified September 14, 2022.

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Is There a Minimum Investment for an Annuity?

The amount of money you need to start an annuity depends on the type of annuity you purchase. If you shop around, you should be able to buy an annuity for an initial investment of less than $10,000.

“For your MYGAs, which is a multi-year guaranteed annuity, some are $2,500,” Joe Liekweg, an agent at Insuractive with an extensive annuity background told “But I’d say for most fixed annuities, you’re looking at anywhere from a minimum of $5,000 to $10,000.”

You can continue investing into a deferred annuity up to one or two million dollars — or even more if you get a special exception from the company that sells you the annuity.

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Different Annuity Types Require Different Investment Levels

Different types of annuities require different minimum investment amounts. This is largely because of how they are set up to be purchased, the way they pay out and the type of long-term goals they address.

Potential Minimum Annuity Investments by Type
Fixed Annuity
Fixed annuities and MYGAs guarantee a fixed interest rate on their premium for a specified period. It can cost as little as $2,500 to open a fixed annuity. You can keep contributing up to one or $2 million over the life of the annuity.
Fixed Index Annuity
A fixed index annuity bases your payout on the performance of a market index — such as the Dow Jones Industrial average or the S&P 500. You can open a fixed index annuity for as little as $5,000 with some companies.
Flexible-Premium Annuity
Flexible-premium annuities are deferred annuities purchased through a series of payments over a long period of time. You can open a flexible-premium annuity for an initial payment of $5,000 with some companies.
Immediate Annuity
Immediate annuities are typically paid for with a single payment and begin paying out within a year. The minimum investment for an immediate annuity can be as little as $25,000.
Single-Premium Annuity
Single-premium annuities are purchased with a single payment. They include immediate annuities that are typically purchased close to retirement as well as single premium deferred annuities, which you can purchase well before you plan to withdraw money, allowing it to accumulate wealth over time. Minimum investments can be as low as $25,000.

You should consider how much money you must invest overall and how an annuity fits into your long-term financial plans.

“It’s based on your liquidity and what you need to have accessible to you at all times because an annuity does lock up your money,” Liekweg said.

Don’t Forget Fees and Other Charges

It’s important to know what annuity fees and commissions you’ll have when buying an annuity.

These can vary from company to company, the type of annuity you choose and how you customize your annuity.

Annuity Fees and Costs to Consider
Administration and Maintenance Fees
These fees cover the costs of managing your annuity account.
Add-On Rider Benefits
Riders are extras you can add to your annuity contract. They can give you flexibility, but they come with a cost. Be aware of how much they are costing you.
Contingent Deferred Sales Charge
Also called a CDSC, this is a fee you must pay if you cancel the annuity earlier than specified in the contract.
M&E Risk Charge
The mortality and expense risk charge is a fee you pay to guarantee that your cost will not change over time.
Underlying Subaccount Expenses
Subaccounts are the separate account funds to which you allocate a variable annuity. You will pay a fee to cover managing the funds which differs for each fund in which you invest.
Surrender Charges
If you cancel or cash out the annuity — typically in less than seven years — you will have to pay surrender charges. These can range from 5% to 25% of the amount you withdraw.
Additional Provisions
Ask your agent about any miscellaneous fees the company may charge and how much they will be.

While fees differ widely, variable annuities typically have the highest fees of any type of annuity. These typically run about 2% to 3% of the value of the annuity per year.

Example of How a Minimum Annuity Would Pay Out

Generally, the more money you put into an annuity, the more you will receive in your payout. Payouts can vary depending on the type of annuity you buy. You can use an annuity calculator to determine what your payout will be.

For example, let’s say you are a man who invested the minimum amount of $25,000 in an immediate annuity at age 67 — the retirement age for full Social Security benefits. You’d begin collecting monthly payments of $125.95 immediately every month for the rest of your life.

But if you were to use a portion of your retirement savings to make a larger investment — say $125,000 — your monthly payout would be $629.74.

For immediate annuities, your age, gender and amount of your investment all play a part in your monthly payout.

Monthly Payout of a $25,000 Immediate Annuity Based on Age and Gender

The difference in monthly payout amounts between men and women is affected by life expectancy. Women tend to live longer, so the lifetime payout is spread out over more years.

Some things to consider when deciding how much to invest and which type depends on the type of annuity, interest rates or stock indexes, your age when you buy the annuity, and your expected retire age.

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Questions to Ask Before Buying an Annuity

There are several questions to ask the annuity agent, your financial advisor and yourself before buying an annuity.

9 Questions to Answer Before You Buy an Annuity
What are your financial goals with an annuity?
What do you want to accomplish by buying an annuity? Make sure you have a clear idea of why you want to buy an annuity and whether it is the best tool to accomplish your goals.
What kind of annuity is best suited for your needs?
Make sure the type of annuity you buy is the best for your situation. Compare the various types of annuities available to find the best fit for your needs, age and financial situation.
How much are fees, commissions and other costs?
Hidden costs may eat away at your expected income. Make sure you know these up front and how they will affect your investment and payout.
How much do you have to invest?
Ask yourself if you can do without the money you are investing until the annuity begins paying out. And make sure it is the best investment you can make toward your financial future.
How well does the timing and length of the investment work for you?
Make sure the time and age at which you will start withdrawing money best fits your needs. Be aware of your potential earnings to make sure it’s enough money.
How much risk are you willing to take?
Consider how much of your investment you may lose and whether the return is worth it. The fixed and fixed index annuities are good alternatives for less risk.
What is the guaranteed minimum interest rate?
Rates vary between companies and annuities. Make sure you are getting the most bang for your buck.
How much of your annuity can you withdraw?
Find out how much you can withdraw from your annuity each year without a penalty. Make sure that’s enough to meet your needs. And talk with your financial advisor or tax professional about any tax issues for withdrawals.
How will an annuity work with your other income?
Look at how your annuity income will work with your retirement savings, pensions and Social Security. Examine how it fits into your income mix and whether it’s the best investment for you.

Other Things to Consider

Remember that annuities limit the accessibility options to the money you invest. You will need to weigh your liquidity against the needs a lifetime income from an annuity will deliver.

This is true whether you’re considering converting part of your retirement savings into an annuity right before retirement or if you’re considering how much to invest in annuities versus other investments when you’re in your 30s or 40s.

“It wouldn’t be suitable to take 100% of your money and throw it into an annuity and lock it up. That’s just not a good thing,” Liekweg said.

The bottom line is that you should ask yourself what you want your money to do for you — and then discuss that with your financial advisor or the agent selling the annuity.

“There has to be a conversation between you and the agent that’s helping you about that suitability factor. And that helps break down what allocations of your money you put into an annuity,” Liekweg said.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: September 14, 2022

7 Cited Research Articles writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

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