If you have $1 million saved, you may be wondering how much monthly retirement income it could realistically generate. You may also have several million dollars but only want to allocate $1 million toward creating reliable income.
The answer depends heavily on your age, marital status, where you live, when you begin taking income, and which annuity carrier you choose. Based on the scenario I reviewed, $1 million could generate approximately $6,400 per month immediately or around $9,500 per month after a five-year waiting period.
Those figures are examples not universal quotes. Annuity payouts, product features, and carrier ratings can change, so it is important to compare the options available when you are ready to make a decision.
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!)
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How Much Monthly Retirement Income Can $1 Million Generate?
For this example, I looked at a married couple living in Colorado. Both spouses were 65 years old, and they wanted to use $1 million to create joint lifetime income.
When I compared immediate-income options from nearly 70 carriers, the highest payout shown was approximately $76,800 per year. That equals:
- $6,400 per month
- $76,800 per year
- Income beginning immediately
- Lifetime income covering both spouses
Talcott showed the highest immediate payout in this particular comparison, followed by other carriers such as Nationwide. Someone who places greater importance on financial strength ratings may prefer a highly rated carrier, even if its initial payout is slightly lower.
The highest-paying annuity is not automatically the best annuity. The right choice depends on the income you need, when you need it, the carrier’s financial strength, and what you want the rest of your retirement assets to accomplish.
👉 Want to compare current income options for your situation? Visit johnstevenson.com to use my annuity calculators or schedule a call with me.
What If You Need the Income Immediately?
If you are already retired and need income now, waiting several years may not be practical. In that situation, an immediate payout of approximately $76,800 per year could be attractive.
That $6,400 in monthly income would be contractual lifetime income under the annuity’s terms. You would not have to rely entirely on market performance or determine how much to withdraw from your portfolio each year.
Many retirees are shown a traditional 60/40 portfolio and given an estimated amount that it should generate based on market conditions. The challenge is that market returns are uncertain, especially during the early years of retirement.
An annuity creates a different kind of income. You are using a portion of your savings to purchase an income stream that you and, when selected, your spouse cannot outlive.
I sometimes describe it as buying a job you do not have to work. You are retired, but you still receive predictable income similar to the paycheck that once gave you stability while you were working.
How Waiting Five Years Could Increase the Income
If this couple did not need income immediately, the potential payout changed significantly.
Suppose they invested the same $1 million at age 65 but waited until age 70 to begin taking income. In the comparison shown, Nationwide produced approximately $114,000 per year after five years.
That equals roughly:
- $9,500 per month
- $114,000 per year
- Joint lifetime income
- Payments continuing as long as either spouse remains eligible under the contract
By age 95, the couple could have collected approximately $2.8 million in cumulative income. If either spouse lived beyond that age, the payments would continue according to the contract.
Waiting longer generally gives the annuity more time to increase its income benefit base. It may also allow the owner to qualify for a higher lifetime withdrawal percentage.
However, waiting five years is not automatically the right decision. You still need money to cover your expenses during that waiting period, and delaying income only makes sense when it fits your overall retirement plan.
💡 Pro Tip: Do not select an annuity based solely on its highest possible future payout. Make sure the contract also performs competitively if you need to activate income earlier than planned.
How the Income Benefit Base Works
In the five-year example, the annuity included a 25% income-based bonus and an 8% simple annual roll-up. Together, those features increased the benefit base used to calculate future income.
The benefit base reached approximately $1.35 million after the first year. It then received roughly $100,000 in additional roll-up value during each following year, eventually reaching around $1.75 million.
That benefit base was then multiplied by a 6.55% lifetime withdrawal rate to produce approximately $114,000 in annual income.
It is important to understand that the benefit base is not necessarily the same as your cash value. It is a separate figure primarily used to calculate how much lifetime income the annuity will pay.
The income rider also has a charge that is deducted from the contract’s account value. Meanwhile, the account value may be affected by:
- Index interest credits
- Rider charges
- Lifetime withdrawals
- Other provisions within the contract
The account may receive credits based on the performance of an index such as the S&P 500, subject to the contract’s terms. However, the primary purpose of this strategy is lifetime income, not maximizing liquid account value or leaving the largest possible inheritance.
Your Retirement Date Can Change the Best Annuity
One of the most important points from this comparison is that the leading carrier changed depending on when income began.
For example, Nationwide was especially competitive at the five-year mark because its lifetime withdrawal rate increased from 5.95% to 6.55%. That made five years a particularly strong income starting point for that contract.
If income began after three years, the same Nationwide example produced approximately $92,000 annually, or about $7,667 per month. After four years, it produced approximately $98,000 annually, or about $8,167 per month, but other carriers offered higher payouts at that point.
In the comparison:
- Aspida, Global Atlantic, and Corebridge were competitive around the three-year mark.
- Global Atlantic, MassMutual, and Aspida were stronger around the four-year mark.
- Nationwide moved to the top when income was delayed for five years.
This is why I ask people when they realistically expect to retire. I also ask whether they might begin income earlier or later than planned.
If you are absolutely certain you will wait five years, one carrier may clearly provide the strongest payout. If five years is only an estimate and you may need income after two, three, or four years, a carrier that remains competitive throughout that entire range could be the better fit.
👉 If you want help finding the strongest option for your expected retirement date, schedule a call with me. We can compare the numbers together and see how the payouts change at different starting ages.
Balance Income, Safety, Diversification, and Legacy
Income is important, but it should not be the only factor in your decision. Carrier ratings and financial strength also deserve consideration, especially when you are allocating as much as $1 million.
Some retirees may feel more comfortable selecting an A- or A+-rated carrier, even when another company offers a slightly higher payout. Higher-rated carriers generally have stronger financial resources, but no rating eliminates every risk.
You can also divide the money between multiple carriers. For example, you might place $500,000 with Global Atlantic and the other $500,000 with Corebridge rather than putting the entire amount into one contract.
That approach can provide additional diversification while still creating contractual lifetime income.
You should also be clear about whether the money is intended for income or legacy. In the five-year example, the account value and death benefit could decline over time as withdrawals were taken.
Ultimately, $1 million could generate around $6,400 per month immediately in the scenario I reviewe. Waiting five years increased the income to approximately $9,500 per month.
Your actual results will depend on your age, state, marital status, income start date, carrier, contract terms, and the rates available when you apply.
Conclusion
$1 million could generate approximately $6,400 per month immediately or around $9,500 per month after waiting five years. The right strategy depends on when you need income, whether you want joint lifetime protection, and how much flexibility or legacy value you want to preserve.
Because payouts and carrier options can change, I believe it is important to compare several annuities before making a decision.
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