Here is a number that should change how you plan. About 1 in 4 men who reach age 65 will live past 89, and 1 in 4 women past 92. Half of today's 65-year-old women will see their 86th birthday.
Living a long life is a blessing, but it carries a quiet risk: outliving your money. That is the one problem an income annuity is built to solve. You hand an insurance company a lump sum, and it promises to pay you a set amount every month for the rest of your life, no matter how long that turns out to be.
In late 2026, with payouts reflecting today's higher interest rates, this plain tool is worth a fresh look. The hard sales pitches around it are not.
The one thing an annuity does that nothing else can
An income annuity buys you a paycheck you cannot outlive. That matters because averages hide the real danger. According to the Social Security Administration's 2023 life table, used in the 2026 Trustees Report, a man who reaches 65 lives about 18.1 more years on average, to roughly age 83, and a woman about 20.7 more years, to roughly 86.
But plenty of people blow past those averages. Around 24 percent of 65-year-old men and 35 percent of women reach 90. A common guideline says you can withdraw about 4 percent of your savings the first year, then raise that dollar amount for inflation each year after.
This came from research by William Bengen, who tested how a mix of stocks and bonds would have held up across every stretch of history he could find, including severe downturns like the 1930s and the 1970s. He looked for a withdrawal rate that would have survived at least 30 years through those harsh sequences.
But what held up in the past is no promise about the future. A run of poor market years early in retirement, a mix that is too cautious, or higher-than-expected inflation can drain the account well before 30 years are up.
An annuity flips that worry onto the insurer. You are not trying to beat the market. You are buying the promise that the checks keep coming.
The plain vanilla version worth considering
The simplest annuity is the single-premium immediate annuity, often called a SPIA. You give the insurer a lump sum, and in return it sends you a check. Immediate annuities generally begin payments within one year, and you can pick a payment term, such as a set number of years, or income for life.
The examples here are monthly lifetime SPIAs with payments starting next month. In late 2026, one set of top insurer quotes showed a 65-year-old man could turn $100,000 into roughly $701 a month for life, and a woman about $672.
That works out to roughly an 8.4 percent payout rate for the man, though remember part of each check is simply your own money coming back. On $500,000, the same man might collect around $3,500 a month.
The tradeoff is real. A basic life-only annuity pays nothing to your heirs. If you die in year two, the insurer keeps the balance. You can add protections that pass money to a beneficiary, but each one shrinks your check.
A period-certain option keeps the scheduled payments going to your beneficiary for the rest of a set term, say 10 or 20 years, if you die early. A cash refund pays the beneficiary a lump sum equal to any premium you did not live to collect.
An installment refund keeps the payments coming until the total paid equals what you put in. With an installment refund, that man's $701 drops to about $671.
Why your check depends on age, sex, and who you cover
Three things drive the size of your payment, and none of them is a trick. The first is age. The older you are when you buy, the fewer years the insurer expects to pay, so each check is bigger.
A 70-year-old gets noticeably more than a 60-year-old on the same deposit. The second is longevity by sex. Because women live longer on average, a woman's check is smaller than a man's for the same money.
The third is whether you cover one life or two. A joint annuity that keeps paying a surviving spouse costs more, so the monthly amount is lower. In late 2026, a 65-year-old couple choosing 100 percent survivor coverage might receive about $622 a month per $100,000, against $701 for a single man.
Interest rates matter too, since the insurer invests your premium to fund the checks; when rates are higher, payouts tend to be higher. Here is the key discipline: never put all your savings into an annuity.
Keep cash for emergencies, home repairs, and the freedom to change your mind.
The kinds that earn the skepticism
Not every product with the word annuity on it is the simple income tool above. A variable annuity is an investment product wrapped in insurance. The Securities and Exchange Commission warns that variable annuities stack administrative charges, insurance charges, optional rider fees, and the expenses of the underlying investment funds, all skimmed from your return.
A fixed indexed annuity is a different animal. It is an insurance product, not a security. Your principal is not invested directly in the market; the insurer credits interest tied to an index, held down by caps or participation rates that limit how much of a gain you keep.
Optional income or death-benefit riders may carry their own annual fees, though some contracts include them free, so read the specific contract. Both types usually bring surrender charges, a penalty for pulling money out early.
For variable annuities, the SEC's investor guide shows a sample schedule starting at 7 percent in year one and dropping 1 point a year, and says the surrender period typically runs six to eight years, but sometimes as long as 10 years; one SEC investor bulletin notes it can stretch to 10 years or longer. Your own contract sets the exact length, so check it.
Many contracts let you withdraw 10 percent a year penalty-free. Fixed indexed annuities, regulated by the states rather than the SEC, tend to run longer, commonly 7 to 15 years, with first-year charges that in some contracts reach 9 or 10 percent before stepping down.
Both pay agents generous commissions, which is why they are pushed hard. If someone urges you to swap one for another, the SEC warns the exchange generally starts a new surrender period, so check before you move a dime.
A newer tool for taming required withdrawals
If required minimum distributions are pushing you into a higher tax bracket, a qualified longevity annuity contract, or QLAC, deserves a look. It is a deferred income annuity you buy inside a traditional IRA or an eligible employer plan such as a 401(k).
The contract value is left out of the account balance used to figure your required minimum distributions, but only until the annuity's payments begin. Once the income starts, it is taxed like other traditional-account withdrawals.
If you funded the contract entirely with pretax money, the payments are fully taxable; if the account holds after-tax basis, part of each payment can be nontaxable. Either way, the tax is deferred, not erased.
Income can start as late as age 85. For 2026, IRS Notice 2025-67 keeps the limit at $210,000 per person, which means a married couple can commit up to $420,000 combined. The SECURE 2.0 Act, through final rules issued in 2024, scrapped the old cap that limited QLAC premiums to 25 percent of your account.
Now the flat dollar limit applies no matter how large your account. A QLAC does two jobs at once. It trims the taxable withdrawals you must take in your 70s, and it guarantees a stream of income starting deep in old age, exactly when other savings may be thin.
Note that Roth IRAs do not qualify, since they carry no lifetime required distributions.
Protect yourself before you sign anything
A few habits will keep you out of trouble. First, understand the free-look period, your right to cancel a new annuity and get your money back. The National Association of Insurance Commissioners publishes a model annuity disclosure regulation, but the model is not itself law.
What governs you is the version your state has adopted and your own contract. The model suggests that if the insurer does not hand you the buyer's guide and disclosure document at or before you apply, you get at least 15 days to cancel, and that this window runs alongside any longer free look your state requires.
Because the actual rules vary by state and by contract, ask in writing exactly how many days you have, and read the whole contract during that window. Second, shop at least 3 or 4 insurers with the identical request: same deposit, same age, same payout option.
Because quotes vary widely, an hour of comparison can add real money to every future check. Third, check the insurer's financial strength, since your income depends on the company staying solvent for decades.
Your state's insurance guaranty association backs annuities up to a limit that varies by state, so splitting a large purchase between two strong insurers can keep you inside the protected amount. Finally, do not let anyone rush you.
Pressure to sign today is a warning sign, not a bargain.
The best annuity may be one you already own
Before you buy anything, squeeze the annuity the government already sells you: Social Security. For every year you wait to claim past your full retirement age, up to age 70, your benefit grows by about 8 percent through delayed retirement credits.
Waiting from a full retirement age of 67 to age 70 raises your monthly check by roughly 24 percent, and that larger amount then rises with inflation every year for life. That inflation protection is the key edge.
A plain fixed annuity pays a level check that never grows, so rising prices slowly erode what it buys; at 3 percent inflation, a level payment loses roughly a quarter of its purchasing power in about 10 years. For many people, delaying Social Security is a strong value, but how strong depends on your own health and likely lifespan, your spouse's benefit and survivor needs, and whether you have cash to live on while you wait.
If a guaranteed-income gap remains after you have claimed, a modest immediate annuity can help fill it. Just treat a level-payment annuity as a floor under today's basic bills, not a hedge against decades of rising costs, and keep the rest of your savings invested for growth and within reach.
A field guide to the main types of annuities
| Type | How it works | Main risk or cost to watch |
|---|---|---|
| Single premium immediate (SPIA) | Lump sum now; monthly lifetime checks start next month in these examples (immediate annuities generally begin within a year, and a set term is also available) | Life-only version pays nothing to heirs if you die early |
| Deferred income annuity (DIA) | Pay now, income starts on a future date you choose; can be bought with ordinary savings or inside a retirement account | The premium is given up permanently in exchange for income; there is normally no cash surrender value, so the principal is gone even after payments begin |
| QLAC (a deferred income annuity in a retirement account) | Buy inside a traditional IRA or an eligible employer plan such as a 401(k); income can start as late as age 85 | Contract value is left out of the balance used to figure required withdrawals only until payments begin; the income is taxed when paid, fully if funded with pretax money, partly nontaxable if after-tax basis is present. 2026 cap of $210,000 per person; Roth IRAs do not qualify |
| Fixed deferred (multi-year guarantee) | Set interest rate for a term, like a CD | Surrender charges if you withdraw before the term ends |
| Fixed indexed | Insurance product; interest tied to an index, with caps | Caps limit upside; riders may add fees; surrender periods often run 7 to 15 years |
| Variable | Investment product; payments vary with underlying funds | Fund expenses plus insurance and rider fees; surrender charges, with a sample SEC schedule starting at 7 percent and declining each year, over a surrender period the SEC says typically runs six to eight years and sometimes 10 years or longer |
Here is the practical takeaway. Add up your essential monthly bills, the ones that must be paid no matter what: housing, food, utilities, insurance. The goal is to cover that floor with income you cannot outlive.
For most people, Social Security does much of that job, and its yearly inflation raises are a real edge that a level-payment annuity cannot match. If a gap remains after you claim, a plain immediate annuity can help fill it, as long as you remember a fixed check does not grow with prices.
Then invest the rest of your savings for growth and keep it within reach. Steer clear of the complex, high-commission products unless you fully understand every fee and every year of surrender charges.
Shop several insurers, read the contract during your free-look window, and never sign under pressure. A guaranteed paycheck is worth having. Overpaying for one is not.
Sources
- Social Security Administration, Period Life Table for 2023, 2026 OASDI Trustees Report (2026)
- Internal Revenue Service, Notice 2025-67, Pension Plan and Annuity Cost-of-Living Adjustments for 2026 (2025)
- U.S. Securities and Exchange Commission, Variable Annuities: What You Should Know, Office of Investor Education and Advocacy
- National Association of Insurance Commissioners, Annuity Disclosure Model Regulation (Model #245) and Buyer's Guide to Annuities (2021)
- My Annuity Store, Income Annuity Rates: SPIA and Rider Payouts (October 2026)
- Financial Industry Regulatory Authority, Investor Guidance on Annuities and Surrender Charges (FINRA)