How much will the $200,000 annual payment pay me per month?
An annuity can be an attractive option for building your retirement. Adding guaranteed retirement income to your retirement can give you financial stability. But the exact amount you will receive from an annuity each month will vary. Break down what a $200,000 annuity will pay you each month. One Financial Advisor can help come up with a financial plan for your retirement needs and goals.
What is Annuity?
One Annuities is a financial contract between an investor and an insurance company that typically locks in a recurring monthly payment in exchange for an investment. In some cases, you will provide the full amount upfront. Elsewhere, you’ll pay your insurance company over a long period of time.
After you provide funds, your insurance company will periodically make payments in a predetermined amount for a specific period of time. Most annuity buyers use the money as an additional source of income for retirement. But retirement is not a requirement. You can buy an annuity if you want a guaranteed source of income for every situation.
Factors affecting payment
The exact amount you can expect from a $200,000 annuity will vary based on three factors:
-
Interest rate: When you subscribe to an annuity, you will see a interest rate specified in the contract. You’ll want to lock in high interest rates on higher payments.
-
When you want the payments: You can choose between an immediate annuity or a deferred annuity. An immediate annuity begins immediately. But typically you’ll see a higher monthly payment with a deferred annuity.
-
Annuity type: The monthly payment you receive from an annuity may or may not fluctuate. If you sign up for a fixed annuity, you lock in guaranteed monthly payments. If you sign up for a variable annuity, you won’t find guaranteed monthly payments. Variable annuities are often tied to market factors. So if interest rates go up, your monthly payment may go up.
The table below gives examples of a fixed-income, immediate, lifetime, fixed-income $200,000 annuity that will pay out to annuity recipients of various ages. The figures are derived from a Charles Schwab Calculator.
Estimated monthly payments of a single life $200,000 only a single life + 10 years a number of single lives + certain 20 years of a single life + cash 85 $2,586 $ 1,809 $1,203 $1,836 80 $1,945 65 $1,132 $1,116 $1,045 $1,067
The unique details of your annuity will determine the monthly payment. Take the time to carefully review the information in your annuity contract to make sure your payout is what you want.
Should you get an annuity?
Depending on your financial circumstances, an annuity can be a reliable source of income for your retirement. One of the factors to consider is the need for a reliable income. A fixed annuity provides a reliable source of income whether you are retired or not. A second factor to consider is your expected lifespan. If you have a long life expectancy, then an annuity can help you support yourself for that long period of time. The third factor has to do with how much you want to be involved in your financial management. An annuity sends you a monthly payment each month. You won’t have to oversee investments, rebalance your portfolio, or manage tenants to receive this income.
Now, consider three reasons when another investment vehicle may be more suitable:
-
High fees: Unfortunately, most annuities have high fees involved. If you want to avoid fees, choosing another investment is the way to go.
-
Without access to the principal: Once you sign up for an annuity, you won’t be able to withdraw your funds. So if a large expense comes up, this principal will not be accessible.
-
Other savings priorities: If you want to save for other purchases, the cost of an annuity may be too much to commit.
bottom line
An annuity can be a useful investment option that adds value to your retirement fund. But it is not the right choice for everyone. Depending on your financial situation, you may also want to consider other options. If you can’t decide if an annuity is right for you, it’s time to talk to a financial advisor. He or she can help you evaluate your entire financial picture to see where an annuity might fit into the picture.
Retirement Tips
-
Working with a Financial Advisor to help you map out a solid retirement plan. SmartAsset’s free tool connects you with up to three financial advisors serving in your area, and you can interview the right advisors for you for free to decide which one is right for you. If you are ready to find an advisor who can help you achieve your financial goals, start right now.
-
Saving for retirement starts with understanding how much you should save. SmartAsset of free retirement calculator can help you figure out how much you should save.
Image source: ©iStock.com/fizkes, ©iStock.com/FatCamera, ©iStock.com/insta_photos
Post How much is the $200,000 annual payment per month? appeared first on SmartAsset Blog.