Breaking Stories

A $1.5 Million Annuity Could Get You This Month Yearly

S&P Futures

3,600.25

+11.75(+0.33%)

 

Dow Futures

29,352.00

+91.00(+0.31%)

 

Nasdaq Futures

10,869.00

+28.50(+0.26%)

 

Russell 2000 Futures

1,700.20

+7.50(+0.44%)

 

Crude Oil

87.32

+0.05(+0.06%)

 

Gold

1,680.70

+3.20(+0.19%)

 

Silver

19.06

+0.12(+0.64%)

 

EUR/USD

0.9706

-0.0003(-0.03%)

 

10-Yr Bond

3.9020

-0.0370(-0.94%)

 

Vix

33.57

-0.06(-0.18%)

 

GBP/USD

1.1090

-0.0009(-0.08%)

 

USD/JPY

146.8230

-0.0380(-0.03%)

 

BTC-USD

19,139.72

+68.73(+0.36%)

 

CMC Crypto 200

434.97

+1.25(+0.29%)

 

FTSE 100

6,826.15

-59.08(-0.86%)

 

Nikkei 225

26,355.97

-40.86(-0.15%)

 

SmartAsset: How Much Would a $1.5 Million Annuity Pay?

It’s very difficult to state a clear average for annuity payments. This is because the rate of payment from annuities depends on several different factors, most significantly:

Lump sum vs. structured payments. Your annuity will generally pay more if you buy it in one lump sum vs. if you pay that same amount of money over time.

Date of purchase. The farther in advance you purchase your annuity, generally the higher your return.

Amount of payment. Annuities tend to have a higher rate of return when you spend more on them.

Lifetime vs. fixed period. Fixed-period annuities tend to have different rates of return compared with lifetime annuities because these are guaranteed products, while lifetime annuities are speculative based on how long your retirement lasts.

Length of annuity. If you buy a fixed-period annuity, the longer the term of your contract the better the rate you will receive. You will get less money per month, but you will receive more over the lifetime of the contract.

Company involved. Finally, different companies will offer you different products. The exact return that you can receive depends entirely on who you buy your annuity from and what they’re willing to offer, because there is no one set of rates that everyone adheres to.

Even within these categories there is more detail because annuities can have three different structures for their returns: fixed rate, variable and indexed.

A fixed-interest annuity is one in which the return rate is set in advance. The company promises a specific payment over a specific period of time. A variable interest annuity is one in which the return is based on outside forces such as investments and market rates. The company specifies what the annuity’s return will be based on, and then makes payments depending on those outside factors. Finally, an indexed annuity is one in which the annuity’s return is pegged to some third-party index like the S&P 500. The company specifies what index your return will be based on and then makes payments as appropriate.

The result is that it’s extremely difficult to calculate a clear, average rate for annuity payments.

However, there is some data out there. Term certain annuities with a fixed rate of payment are the easiest to assess because these have specific numbers involved. With those products, studies have found that they currently offer rates of return ranging between 1% and 5.5%, with the average coming in around 3.2%. But you should take even those numbers with a grain of salt, since they will change based on factors ranging from how long your contract lasts to when you buy it.

How Much Would a $1.5 Million Annuity Pay?

So, with all of that said, how much should you expect out of a $1.5 million annuity?

For most people saving for retirement, this is the critical question. They want to know how much this product will pay them once they retire so they can add that to their financial planning. And the good news is that you can, indeed, know that figure. It depends on the details of the product that you plan on buying, but when you look at investing in a specific annuity you will see the exact monthly rate that you will get for any given set of circumstances.

For example, say you buy an annuity for $1.5 million from Schwab with the following details:

Payment: Lump sum up front

Date of purchase: 30 years in advance of annuitization

Structure: Lifetime annuity

Return: Fixed return

So you buy an annuity 30 years before you plan on collecting. You pay the whole price up front and you buy a retirement product that will make regular monthly payments for the rest of your life once in retirement. Based on those factors, some annuity contracts will pay you $29,624 per month for the rest of your life once you begin collecting on that contract.

Or, say you change the factors slightly:

Payment: Lump sum up front

Date of purchase: 30 years in advance of annuitization

Structure: Period certain for 20 years

Return: Fixed return

In this case you have, again, bought the annuity 30 years in advance while paying the whole purchase price up front. However, this time you won’t collect the annuity payments for life. You will collect monthly payments for 20 years after which the contract will expire. In that case you might receive $35,373 per month for the duration of the contract, eventually receiving a total of $8.5 million. The annuity will pay more because of the certainty involved with a term contract rather than the open-ended nature of a lifetime product.

These numbers are generous not only because of the $1.5 million investment but also because of the long lead time. With 30 years, Schwab can make a lot of money off of your initial investment, so they can afford to pay a lot of it back.

Bottom Line

SmartAsset: How Much Would a $1.5 Million Annuity Pay?

Annuities are insurance products that you buy up front, and then you are paid a fixed amount over time. They are popular retirement products given the degree of certainty they offer, but how much an annuity will pay depends entirely on the exact product you purchase.

Tips for Retirement Savers

A financial advisor help you create a financial plan for your retirement savings goals. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Annuities have their upsides, most importantly the certainty they can offer for retirement savers. But critics suggest that they can cost you far more than if you had spent the same amount of time invested in a simple index fund. Learn here about the pros and cons.

Photo credit: ©iStock.com/shapecharge, ©iStock.com/PeopleImages, ©iStock.com/mapodile

The post How Much Would a $1.5 Million Annuity Pay? appeared first on SmartAsset Blog.

Advertisement

TheStreet.com

Welcome to the Jungle, It’s Not Fun and Games

It’s a dauting task to manage these markets, which have some similarities to those during Great Financial Crisis, but here’s what to do.

Barrons.com

Medicare Open Enrollment Starts Soon. Here’s What to Know.

Medicare’s open enrollment period arrives predictably each fall, blanketing beneficiaries in advertisements. From Oct. 15 through Dec. 7, the roughly 65 million Medicare beneficiaries can pick a new Medicare Part D drug plan, a new Medicare Advantage plan, or switch from original Medicare into a Medicare Advantage plan or vice versa.

Motorious

Rule The Road in This 1953 Buick Special Convertible

This is an affordable way to get into classic car collecting.Plenty of people think they need to have hundreds of thousands of dollars sitting around to get into collecting classic cars. That’s the case if you’re going for the big fish, the white whale cars everybody seems

MarketWatch

Your portfolio needs diversification. Here’s the best way to go about it in these volatile times

A working adult might have a 401(k), IRA, Roth IRA, a taxable brokerage account and a money-market account. You might also have a crypto wallet or two, a high-yield savings account with CDs, a TreasuryDirect.gov account for I-bonds and other Treasurys, pensions, or other retirement plans lingering at old employers. Take the classic 60/40 portfolio construction, which means putting 60% of your investments in stocks and 40% in bonds, or other fixed-income investments.

Reuters

China auto sales growth slows in Sept as signs of softening demand emerge

SHANGHAI/BEIJING (Reuters) -Sales of electric vehicles (EV) in China rose at their slowest pace in five months as demand faltered in a sputtering economy despite government incentives to revive the auto market, though industry officials forecast a stronger end to the year. September sales of new energy vehicles (NEV), which include pure EVs, plug-in hybrids and hydrogen fuel-cell vehicles, increased 93.9% from the previous year, data from the China Association of Automobile Manufacturers (CAAM) showed on Tuesday. China’s overall auto sales growth also slowed compared to the previous two months, growing 25.7% in September to 2.61 million vehicles.

Yahoo Finance Video

Webinar: Inflation’s Impact on Your Retirement

An event from Yahoo Finance, the Bipartisan Policy Center’s Funding our Future coalition, and the Alliance for Lifetime Income looks at the challenges facing America’s retirees in a high-inflation economy. Featuring interviews with Sen. Roger Marshall (R-KS), Jean Chatzky, and more.

The Hill

Where the Latino vote stands ahead of midterms in Nevada

(NewsNation) — Lydia Dominguez is proud of her Latino roots. She was born in Mexico, moved to El Paso, joined the Air Force and now lives in Las Vegas with her two sons. For most of her life, Dominguez identified as a Democrat — she voted for former President Barack Obama twice. “I remember when…

GOBankingRates

Social Security: Could COLA Increase Reduce Your Food Stamps Benefits?

For the 66 million Americans receiving Social Security benefits, according to the Social Security Administration (SSA), many are eligible for additional financial assistance programs such as Medicare…

Reuters

Ex Credit Suisse banker in $86 million London appeal after Romanian conviction

A former Credit Suisse banker, who was convicted and sentenced to prison in Romania for a decade for alleged espionage in 2013, is hoping to revive an $86 million London claim against the Swiss bank for lost earnings. Vadim Benyatov, a former head of European emerging markets focused on energy sector privatisations, is urging the Court of Appeal to overturn a lower court decision to dismiss his case, in which he alleges the Swiss bank owes him a duty of care and that his employment contract implied a considerable indemnity. A lawyer for Benyatov told the Court of Appeal on Tuesday that his client, who was made redundant in 2015 and has been unable to find suitable work since then, had been convicted for doing his job.

The Wall Street Journal

Moderna Stock Jumps After Cancer Vaccine Announcement

Shares of Moderna surged more than 11% on Wednesday after the biotech company [announced](https://investors.modernatx.com/news/news-details/2022/Merck-and-Moderna-Announce-Exercise-of-Option-by-Merck-for-Joint-Development-and-Commercialization-of-Investigational-Personalized-Cancer-Vaccine/default.aspx) it would develop and sell a personalized cancer vaccine with Merck. The stock was the biggest gainer on the S 500 around midday. Shares of Merck were little changed. Merck will pay Moderna $250 m

What's your reaction?

Excited
0
Happy
0
In Love
0
Not Sure
0
Silly
0

You may also like

Leave a reply

Your email address will not be published. Required fields are marked *