How Much Does a $500,000 Annuity Pay Per Month?

Annuity.org used data from Cannex, an independent company that provides access to a database of updated annuity products, to calculate the expected monthly payments of a $500,000 annuity.

The estimates shown are for an immediate $500,000 annuity with lifetime payments. The payouts listed for a joint annuity with a male and female spouse assume that both spouses are the same age and that payments remain level if either spouse is alive.

Monthly Payouts for $500,000 Immediate Life Annuity

Income annuities are a popular product that many of my clients buy to have predictable income in their retirement years. Immediate annuities are very popular with clients who want income within 30 days after opening an account. Of course, there are many variations and nuances to be aware of, as payment calculations utilize gender, age, time frame, years to receive income and the product vehicle, all of which contribute to calculating the income amount.

For example, a $500K annuity would immediately provide $2,992 a month to a 65-year-old woman, helping her plan her expenses in retirement. Older individuals receive more, as life expectancy is fewer years; those married jointly receive less, as two people share the income, among other scenarios. The good news is that annuities provide a safe way to obtain predictable income in retirement. There’s no market risk, generally no fees, just a fixed amount and a timeframe for income. An immediate annuity sets my clients on a retirement track with predictable income, and they love it.

Aamir M. Chalisa, MBA, LUTCF, MDRTGeneral Manager at Futurity First Insurance Group

Aamir M. Chalisa is the GM at Futurity First, leading Oak Brook’s top branch. With 30+ years’ expertise, chairs GAMA Global, driving diversity worldwide.

Case Studies

To understand how different factors impact the approximate payout of a $500,000 annuity, let’s look at three scenarios. These case studies represent hypothetical estimates and are meant to give you a general idea of how different customers might receive different payouts for the same premium amount.

These payout estimates were calculated using Cannex data.

Scenario 1 – Ted

Name: Ted

Age: 75

Looking To Invest: $500,000

• Ted wants a guaranteed income stream for life
• He purchases an immediate annuity with a lifetime payment

Monthly Payout: $3,901

In this scenario, retiree Ted wants to set up a guaranteed income stream he can’t outlive. An immediate annuity converts his $500,000 into payments of $3,901 each month.

This calculation assumes that Ted chose a single life policy which continues payments until his death and has no death benefit. If Ted passes away before he receives the full return of his annuity premium, his beneficiaries will not receive the remaining amount of the annuity payments.

Scenario 2 – Ella

Name: Ella

Age: 65

Looking To Invest: $500,000

• Ella wants guaranteed income in retirement
• She purchases an immediate annuity with a lifetime payout

Monthly Payout: $2,992

Like Ted, Ella purchases a $500,000 immediate annuity with a lifetime payout. However, Ella’s estimated monthly payment is almost $1,000 less than Ted’s. Why is this?

Ella receives lower monthly payments from her annuity for two reasons, and they both come down to the fact that annuity payment calculations are based in part on the annuitant’s life expectancy. Because Ella is 10 years younger than Ted, the insurance company predicts that she’ll receive more payments over her lifetime, so payment amounts are lower. 

Ella’s gender also factors into this because women tend to live longer than men. As a result, Ella’s payments are slightly lower; a 65-year-old man would receive roughly $3,124 per month from a $500,000 immediate lifetime annuity.

Scenario 3 – Irene

Name: Irene

Age: 65

Looking To Invest: $500,000

• Irene wants guaranteed lifetime income and wants that income to go to her beneficiary if she passes away earlier than anticipated
• She purchases an immediate lifetime annuity with a 20-year period certain

Monthly Payout: $2,827

Irene wants a guaranteed income stream for life, but she also wants assurance that her annuity will pay out to her beneficiary if she passes away before receiving the full value of her annuity. So, Irene purchases a lifetime annuity with a 20-year period certain; if Irene passes away before the 20 years have elapsed, her beneficiary will receive the same monthly payments until the end of that period.

Irene’s $500,000 annuity pays approximately $2,827 a month. Though she is the same age and gender as Ella in the previous example, Irene’s payout is lower because she added the period certain rider. This provision represents an extra risk for the insurer, so the provider reduces Irene’s monthly payments to offset that risk.

Factors Impacting How Much a $500,000 Annuity Pays Per Month

Annuity providers calculate payouts differently for every annuity contract. An annuity with a $500,000 premium can have widely varying monthly payments depending on several factors.

• Annuitant’s age: Life expectancy factors into annuity payout calculations because the more years you live after you start receiving payments, the more payments you’ll receive. This means younger people tend to have lower payouts.
• Annuitant’s gender: On a similar note, women tend to have a higher life expectancy than men, so a woman’s annuity payout will be lower than a man’s of the same age.
• Payout period: You can choose an annuity that pays out for a certain number of years, for life, or even your and your spouse’s lives. The longer you’re expected to receive payments, the smaller the payment amount will be. A $500,000 straight life annuity will have a higher payout than a life with period certain or a joint and survivor annuity of the same premium amount. 
• Type of annuity: Immediate annuities are the easiest payments to calculate because they begin paying out right away. If you purchase a $500,000 deferred annuity with an interest rate, the value the annuity accumulates before it converts to income will factor into how much you’ll receive when the contract pays out.
• Riders: Annuity owners can customize their contracts with riders and provisions, like a death benefit or return of premium rider. However, these add-ons often come at a cost and can result in a lower monthly payment.