BlogStructured SettlementWhat Is an Annuity Payment?

What Is an Annuity Payment?

Annuity Payment

Put simply, An annuity payment refers to the regular income stream received from an annuity contract. 

Annuities are insurance products that provide guaranteed income for a set period or for life, starting immediately or at some point in the future. There are several different types of annuities and ways they can provide income, but they all aim to provide a steady cash flow during retirement!

Do You Know What An Annuity Is?

Annuities are contracts issued and guaranteed by insurance companies. To open an annuity, the owner makes either a lump-sum payment or a series of payments. In return, the insurer agrees to make regular income payments beginning either immediately or at some future date. The payments may last for a set number of years or for the lifetime of the annuity owner.

Annuity owners can fund the contract with cash, securities, or money from a retirement account. The funds grow tax-deferred until withdrawals begin. Annuities carry some risks, like the financial strength of the issuing company, so it’s important to choose a strong provider.

When And How Do You Get Annuity Payments

There are several main categories of annuities that determine how income payments will be calculated and received:


Also known as single premium immediate annuities (SPIAs), these begin payouts within a year of purchase. The income stream starts within 30 days to 12 months, depending on contract terms. Income is predictable and guaranteed for life or a set period.


Here, payments don’t begin immediately. The accumulation phase allows time for contributions to earn interest and grow the account value. Payouts start at a later date, you determine. Deferred annuities are useful for retirement savings because they allow tax-deferred growth.


Provide level, predictable payments based on a fixed interest rate. The issuing insurer bears the investment risk and guarantees minimum payments, even if returns are low. Offers stable income but limited growth potential.


Payments fluctuate based on the performance of underlying investments, usually mutual funds. Considered higher risk than fixed annuities because payment amounts can change, but offer more investment options and growth potential.


Also called equity-indexed or fixed-indexed annuities. Interest earnings are tied to a market index, like the S&P 500. Provides more upside than fixed annuities if the index performs well but with a minimum guaranteed return.

How Different Types Work

The varying features and provisions among the different annuity types change the details of how income payments are calculated and received.

Life Annuity – Guarantees income for the lifetime of the annuity owner (and potentially a spouse or partner). Payouts cease upon the annuitant’s death. Offers reliable income until death but limited legacy options.

Annuity Payment

Life Annuity with Return of Purchase Price – Also pays for the annuitant’s lifetime, but if they pass away before receiving income equal to the amount invested, their beneficiary gets the remainder. Lower-income than a straight life annuity.

Period Certain Annuity – Guarantees income for a set period, such as 10 or 20 years. Provides reliable income for a defined timeframe. Helpful if concerned about dying prematurely.

Inflation-Indexed Annuity – Payments increase by a specified percentage to offset rises in inflation. Protects buying power, but starting income is lower than fixed annuities.

Joint Life Annuity – Covers two annuitants, usually spouses or partners, providing income until the second person passes away. Reduces payments over individual annuities, but provides joint coverage.

How Much Do Annuities Pay?

Money from an annuity payment depends on several factors:

  • Type of annuity – Immediate annuities provide higher payments than deferred annuities. Fixed annuities offer set payments while variable annuities provide fluctuating amounts.
  • Age at purchase – The older you are when you buy an annuity, the higher the payouts since your life expectancy is shorter. A 65-year-old may get 5-10% more than a 55-year-old.
  • Principal amount – The more money you use to purchase the annuity, the greater the payments will be. Most insurers have minimum purchase amounts, often $10,000-$25,000.
  • Payout option – Lifetime payouts give higher monthly incomes than period-certain options, which guarantee payments for set timeframes like 10 or 20 years. Joint life payouts are reduced.
  • Interest rates – Current interest rates impact payout calculations. Higher rates at the time of purchase lead to higher payments.
  • Annuity features – Riders providing inflation protection or bonus payments can enhance income but lower the base payout rate.

To illustrate potential payment amounts:

  • A $100,000 immediate fixed annuity for a 65-year-old could pay about $525-$750 per month.
  • A deferred variable annuity might average 5-7% of the value per year, so a $500,000 account could pay around $2,500-$3,500 monthly but fluctuate.
  • A joint life annuity for a 60-year-old couple may pay $400-$600 monthly for life.

So in summary, payouts can range anywhere from 1% to 10%+ annually, depending on the annuity characteristics and benefits. It’s important to shop rates from multiple providers.

Should You Consider an Annuity Contract?

Annuities can be appropriate retirement income sources for certain individuals, such as:

  • People want guaranteed lifetime income to cover essential expenses. Annuities provide reliable payment streams not impacted by market swings.
  • Those without pensions who need to generate their own paycheck in retirement. Annuities create pension-like income.
  • Individuals seeking to supplement Social Security payments. Annuities can provide additional protected income.
  • Retirees concerned about outliving savings. Annuities continue to pay as long as the contract terms dictate.
  • Risk-averse investors value premium stability. Annuities favor safety over growth.

On the other hand, annuities carry drawbacks like high fees, limited access to funds, lack of liquidity, and complex structures.

Weigh the benefits and limitations carefully when considering investing in an annuity income!

Looking To Buy an Annuity Investment?

If an annuity aligns with your financial situation and retirement goals, keep these guidelines in mind when you purchase an annuity:

  • Shop for the Best Rates – Compare quotes from several highly-rated insurers to find the highest payout amount. Get multiple bids before committing.
  • Consider Any Riders – Riders customize contracts. Living benefit riders can increase lifetime payments to hedge inflation.
  • Assess the Insurer’s Health – Purchase from an insurer in strong financial standing, able to uphold the long-term contract. Rating agencies can help gauge stability.
  • Understand Surrender Charges – Surrendering an annuity early results in fees. Know the surrender period and declining penalty schedule.
  • Seek Objective Guidance – Since annuities are complex, consider consulting an annuity specialist not affiliated with an insurer.
  • Read the Fine Print – Know exactly what the contract says about income payments, riders, fees, and limitations before selecting an annuity.


Fairfield Funding annuity payments offer retirees a range of options for guaranteed income. From immediate options providing quick payouts to deferred varieties allowing tax-deferred growth, different contracts can fulfill specific financial situations and concerns. Annuities come with tradeoffs, however, like reduced liquidity and limited withdrawals. Carefully weighing the benefits against the limitations of annuity payments allows retirees to make an informed decision about whether this product aligns with their needs. With proper research and objective guidance, annuities can play an effective role in achieving secure lifetime income.

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