Can I get 7%+ income from an annuity?
That’s one of the biggest questions I hear from people who are looking for guaranteed retirement income. And the answer is yes, in certain cases, it is possible to get 7% or more in contractual lifetime income from an annuity.
But there’s one important thing you need to understand upfront.
This is not the same as earning 7% interest and keeping your full principal untouched. What you’re really doing is buying a guaranteed lifetime income stream, almost like creating your own personal pension.
And for the right person, that can be extremely powerful.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
Tip: See how much an annuity could pay you using my annuity calculator
Why Annuity Income Can Be Higher Than the 4% Rule
A lot of retirees are told to follow the traditional 4% withdrawal rule.
The idea is simple: keep your money invested in a portfolio, often something like a 60/40 mix of stocks and bonds, and withdraw around 4% per year.
The problem is that 4% does not always create enough income.
If you have $1 million, 4% gives you $40,000 per year. That may not be enough for the lifestyle you want, especially after taxes, inflation, healthcare costs, and everyday expenses.
That’s why many people start looking at annuities.
With the right annuity contract, you may be able to generate more guaranteed lifetime income from the same amount of money than you could comfortably withdraw from a traditional portfolio.
💡 Pro Tip: The goal of an income annuity is not always maximum account value. The goal is maximum reliable income.
👉 Want help comparing the best annuity income options? Schedule a call with me here.
How a 7%+ Annuity Income Payout Can Work
Let’s use a simple example.
Say someone is 60 years old and has $1 million they want to turn into guaranteed lifetime income.
Depending on the state, age, marital status, and contract available, certain annuity income riders may generate around $72,000 per year in lifetime income.
That is roughly 7.2% of the original premium.
That income would be guaranteed for life, even if the account value eventually runs down to zero.
That’s the key point.
You are not just pulling interest from an account. You are using the annuity contract to create a lifetime paycheck.
If you live a long time, that can become very valuable. For example, taking $72,000 per year from age 60 to age 95 would equal more than $2.5 million in total income.
That’s the power of lifetime income.
This Is Not the Same as Getting 7% Interest
This is where a lot of people get confused.
If you put money into a fixed annuity or MYGA paying 5%, you may be able to pull out interest while keeping your principal intact, depending on the contract terms.
For example, on $1 million, a 5% interest rate could produce $50,000 per year.
But that is different from lifetime income.
With a lifetime income annuity, the insurance company is giving you a contractual income stream that lasts as long as you live.
That means the payout may be higher than what you could safely withdraw from a normal investment account, but you are also committing that money to an income strategy.
So before choosing an annuity, you need to know what you actually want.
Do you want to park money and take interest?
Or do you want to create the highest guaranteed lifetime income possible?
Those are two different goals.
💡 Pro Tip: If your main goal is income you cannot outlive, you need to compare lifetime income payouts, not just interest rates.
Single Life vs. Joint Life Annuity Payouts
Another big factor is whether the income is based on one life or two lives.
A single-life payout is usually higher because the insurance company only has to guarantee income for one person’s lifetime.
A joint-life payout is usually lower because the income may need to continue for both spouses.
For example, a 60-year-old single person may be able to get over 7% income immediately in certain contracts.
But a married couple, both age 60, may come in slightly under 7% if they want the income to last for both lives.
That does not mean the joint payout is bad.
It just means the contract has to protect two people instead of one.
In some cases, waiting one year, three years, or five years before starting income can significantly increase the payout.
That’s why it is so important to compare different companies and different start dates before making a decision.
👉 Want to see whether single or joint income makes more sense for your situation? Schedule a call with me here.
Why Waiting Can Increase Your Guaranteed Income
Many annuity income riders have something called a benefit base.
The benefit base is not the same thing as your cash value. It is the number used to calculate your future income.
For example, some contracts may offer a guaranteed roll-up rate on the benefit base, such as 8% per year.
That means if you wait to start income, the number used to calculate your payout may grow contractually, regardless of what the market does.
So if you put in $1 million and wait one year, your benefit base may grow to $1,080,000.
If the payout rate is 6.8%, your income would be calculated from that higher benefit base.
That could create income of around $73,000 per year.
If you wait longer, the benefit base may continue to grow, and the payout percentage may also increase as you get older.
That combination can create a much higher effective income rate over time.
In some examples, waiting five years could produce over $100,000 per year in joint lifetime income from a $1 million premium.
That’s why I always tell people not to look at just one number.
You need to look at:
- Your age
- Your state
- Single vs. joint payout
- The benefit base growth rate
- The income rider fee
- The payout percentage
- When you plan to start income
All of those pieces matter.
What About Fees and Account Value?
Income riders usually have fees.
Those rider charges often come out of the account value, not the benefit base.
That means if the account value earns little or nothing, the fees can reduce the account value over time.
But again, if your goal is guaranteed lifetime income, the account value is not always the main focus.
The income rider is designed to create a contractual income benefit.
Some contracts may also offer index-linked growth potential, which means the account value may have the chance to grow based on a market index.
But the main reason people use these contracts is not because they are trying to beat the stock market.
They use them because they want guaranteed income, regardless of what the market does.
If the market goes down, your guaranteed benefit base can still grow based on the contract terms.
That is the part retirees often like.
It gives them a known income number they can plan around.
💡 Pro Tip: Do not buy an income annuity unless you understand the difference between account value, benefit base, and guaranteed income.
Why I Compare Multiple Annuity Companies
One of the biggest mistakes I see is when someone is shown only one or two annuity products.
That is not enough.
There are many annuity companies, many contract designs, and many payout structures. The best company for one person may not be the best company for another person.
For example, one company may have the highest immediate payout.
Another company may look better if you wait three to five years.
Another may be stronger for joint-life income.
Another may be better for someone in a different state.
That’s why comparison matters.
My recommendation is simple: before you buy anything, compare the available contracts.
On my website, you can use my annuity calculators to review different options. If you are looking for the highest lifetime income, the income rider calculator is a good place to start.
You can also compare SPIAs and DIAs, which may provide lifetime income too, although they are not always the highest payout option depending on your situation.
👉 Want help finding the highest contractual lifetime income available to you? Schedule a call here.
Is a 7%+ Annuity Income Strategy Right for You?
A 7%+ annuity income payout can make sense if you want guaranteed income you cannot outlive.
It may be especially helpful if you are tired of relying only on market returns, withdrawal rules, and hoping your portfolio lasts.
But it is not for everyone.
If your main goal is liquidity, flexibility, or leaving the full account value to heirs, then you need to be careful. A lifetime income strategy is built for income first.
That’s why I always recommend comparing your options before making a decision.
You should know exactly:
- How much you are putting in
- When income starts
- How much income is guaranteed
- Whether it covers one life or two
- What fees apply
- What happens to the account value
- What happens if you die early
- What happens if you live a long time
When you understand those details, the decision becomes much clearer.
Conclusion
Yes, in certain situations, you can get 7% or more in guaranteed lifetime income from an annuity.
But remember, this is not the same as earning 7% interest and keeping your full principal untouched.
You are buying a contractual lifetime income stream.
For the right retiree, that can be one of the most effective ways to create pension-like income in retirement.
Instead of guessing what the market will do, you know exactly how much income the contract will pay.
That certainty can be very valuable.
If you are looking for guaranteed retirement income, I recommend starting with the calculators on my website. Compare the income rider calculator, SPIA calculator, and DIA calculator.
Need help with finding the best annuity for your retirement?
Click here to schedule a call with me.
On the call, I can help you:
- Determine what type of annuity is best for you
- Find the highest paying annuities for your unique situation
- Answer any other questions you may have