Suppose my age is X, and I have Y dollars in cash. I want to give them to an insurance company, or another financial institute, in exchange for a monthly income (pension) of Z for the rest of my life. What is a reasonable estimate for the Z I can get, as a function of X and Y?

I understand that the sum may depend on the specific insurance company, but I am looking for a general estimate of how much I can expect to get. What I found so far is this page, which gives an estimate for the case when the age is 65. It looks similar to the "4% rule", which says (if I understand correctly), that at age 65, I can expect to get about 4% of Y per year, which means Z = Y/300 per month.

Probably, if X>65 I can get more than 4%, and if X<65 I can get less; how much exactly?

2 Answers 2


First. The 4% rule, with its origin in the Trinity Study, allows for withdrawals to be adjusted for inflation each year. I don’t know if you realized this.

What you are asking for is called an immediate annuity. Today, even with rates so low, a 65 yr old man would get just under 6% per year. This might seem like a great deal, but remember, you are exchanging your money for an income stream, if you live to 85, and meet your maker, nothing is left for beneficiaries.

As the age of purchase rises, so does the percent return. You can search to find quotes for this product type.

Note: Per Bob's absolutely correct comments - I chose an immediate annuity, Male, 65, no minimum payout, i.e. if you die a few years after purchase, it's over. This, to me, was the simplest example. If you want a death benefit, it's available, with a lower annual percent return. If you want an increasing annual income, also available, but starting with a lower payment, closer to the 4%.

In general, I am not a fan of most annuities, as the fees run high. But, for an older person, 65+, the immediate variety tends towards a very low expense with few bells and whistles.

  • Some annuities have death benefits. Commented Feb 6, 2022 at 1:51
  • Yes, in exchange for a lower annual payout. Some also offer annual increases. There’s not just the one product, but every variant one can imagine. Commented Feb 6, 2022 at 3:12
  • Was just commenting on your statement that "if you live to 85, and meet your maker, nothing is left for beneficiaries." Commented Feb 6, 2022 at 12:00
  • Yes, I need to edit. My answer was for a specific one. I need to make it clear that’s what I was showing, and note that every variation is an option. Commented Feb 6, 2022 at 12:06
  • 1
    Thanks. The phrase "immediate annuity" is what I needed to run a search :-) Commented Feb 6, 2022 at 20:01

There's no simple answer because there are many types of annuities as well as multiple factors that apply to different annuity types (the age you invest, how many years [if any] before you begin withdrawals, your age at the time of the withdrawal, the interest rate at the time you invest, the performance of the market going forward, etc. etc.).

Quality variable annuities used to be offered at guaranteed a deferred growth rate of 6% until beginning withdrawal (I have seen as high as 10% simple for 10 years). If the market did better than that, you'd receive the higher amount.

Annuity commissions are high, so you'll lag the performance of a good market. The tradeoff is that you are insuring that you get paid for life, regardless of how long you live. If it's a 6% per annum policy, that's your floor with the ceiling being market performance (you get the higher of the two). The death benefit is the principal plus the total earnings over the course of the annuity, less money paid to you over the years. I have no clue what the guaranteed per annum numbers are these days but I'd guess less because we've been in a low interest rate environment for some time,

I have a variable that pays 6% a year that I started drawing on at age 59-1/2 and I'll be in the insurance company's pocket in a few years. Then, they'll be supporting me on their dime.

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