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Shopping For An Annuity


Each company prices annuities differently. In 1991, a 65-year old woman buying, an immediate annuity could receive income of around $9,000 to $10,000 a year for life in return for a payment of $100,000.

Annuity purchase rates are based on mortality tables that reflect the expected survival rates as estimated from past experience, and on expected investment earnings. Women pay slightly more than men because they live longer, on the average, and therefore are likely to collect more payments than men. This is just the opposite of the situation in life insurance, where women pay less because of their greater longevity.

The following table gives examples of monthly life income at 65, with 10 years certain, that might result from paying various amounts into a deferred annuity contract for different periods of time. The examples are based on contributions of $2,000 a year paid annually and illustrative rates for men published in 1992.3 Also, for purposes of this illustration, it is assumed that the contract values will accumulate at 7 percent per year. Taxes are not factored in either before or after retirement.

Amount and Duration of Investment Total Accumulated Monthly Benefit (10 years certain) Starting at Age 65
$60,000 over 30 years $202,146 $1,557
$40,000 over 20 years $87,730 $676
$20,000 over 10 years $29,567 $228

3 Women would be paid a lower monthly sum from the same investment because on the average, they would receive it for more years.