How much will a $100,000 annuity pay per month?

When it comes to planning for retirement, figuring out how to create a steady income stream can be a daunting task. Many people spend decades building up savings in individual retirement accounts (IRAs), 401(k)s and brokerage accounts, but once they leave the workforce, the challenge becomes turning that nest egg into reliable monthly income. That's where annuities come into play. 

Annuities are marketed as a way to guarantee income for life, and lately, these types of retirement tools have been gaining more traction. That's because, with interest rates remaining elevated and stock market volatility giving many retirees pause, fixed-income products like annuities have become increasingly more attractive by offering something few other investments do: predictability. 

But before you hand over a lump sum of cash for an annuity, it's important to understand what you're getting in return — and how much income that money will actually generate. So what happens if you have $100,000 to invest in an annuity? How much can you expect to receive each month, and how do you know if it's the right move for your situation? 

Find out more about the benefits of annuities here.

How much will a $100,000 annuity pay per month?

The monthly payout you'll get from a $100,000 guaranteed annuity generally ranges from approximately $525 to just over $1,000 per month, according to an analysis of Cannex data by Annuity.org. That wide annuity payment range is due to a number of key factors at play that determine your monthly payout, which include:

• Your age at the time of the purchase: Generally, the older you are when you begin receiving payments, the higher your monthly check will be. This is simply because the insurance company expects to make payments for a shorter period.
• Your gender: Women typically receive somewhat smaller monthly payments than men of the same age due to having longer average lifespans. 
• The annuity type: Fixed annuities offer consistent, guaranteed payments, while variable annuities' payments fluctuate based on investment performance. Immediate annuities begin paying right away, while deferred annuities start payments at a future date.
• The payment duration: Lifetime annuities pay until death but offer lower monthly amounts. Period certain annuities guarantee payments for a specific timeframe and usually provide higher monthly payments.
• Current interest rates: Higher interest rates at the time of purchase generally translate to higher monthly payments.

To illustrate, a 60-year-old man purchasing a $100,000 immediate fixed annuity might receive around $590 monthly for life, according to Annuity.org's analysis, while a 60-year-old woman might receive approximately $571 monthly. If the same individuals waited until age 70 to purchase, the man might receive closer to $729 monthly and the woman around $689.

For deferred annuities, where payments begin in the future, the monthly amounts would be higher. If you're younger and want annuity income to begin immediately, though, your monthly payments will be a bit lower because the insurance company anticipates making payments for a longer period of time. Conversely, if you wait until age 70 to start collecting, your monthly check will typically be larger because the expected payout period is shorter.

Choosing lifetime income with a survivor benefit so your spouse can keep receiving income after you pass will also reduce your monthly annuity payment slightly. And, if you opt for inflation protection, which would make sense in today's inflationary environment, your initial payments will generally be smaller but may increase each year to keep pace with rising costs.

Learn how an annuity could provide you with guaranteed income during retirement.

How to decide if an annuity makes sense for your finances

Annuities aren't a solution for every retiree, but they can play a valuable role in a broader retirement plan — especially for people concerned about running out of money.

If you're someone who values predictable income, doesn't want to worry about market swings and doesn't already have a guaranteed income source (like a pension), then an annuity might be worth exploring. It's essentially a way to convert a chunk of your savings into a personal pension.

However, annuities do come with trade-offs. You typically lose access to your principal once you hand over the lump sum, and depending on the terms, your money may not be passed on to heirs if you die earlier than expected. There are also fees and surrender charges with many types of annuities, especially variable and indexed ones, so it's important to read the fine print.

You should also compare annuity payments to what you might be able to generate by managing your investments yourself. Meeting with a financial advisor or retirement income specialist can help you determine whether the security of a guaranteed payment outweighs the potential benefits of investing your money elsewhere.

The bottom line

A $100,000 annuity can provide you with a monthly income of between roughly $525 and just over $1,000, depending on your age, the payout structure and the features you select. That income can be a helpful foundation in retirement, especially when combined with Social Security benefits or other investments.

But whether an annuity makes sense for your finances depends on your overall goals, risk tolerance and how much flexibility you want with your money. The good news is, however, that you don't have to commit all at once. You can always use a portion of your retirement savings to buy an annuity and keep the rest invested elsewhere. At the end of the day, the right income plan is the one that gives you peace of mind and ensures your money lasts over the long term.