How Much Will You Really Earn From an Annuity

Every week, someone asks a version of the same question. If I put my money into an annuity, how much will I actually earn? They are not talking about projections or hypotheticals. They want the truth, the real number, the guaranteed outcome. That is the right question because annuities are not about possibilities. They are about contractual guarantees.

Annuities are never bought for what they might do. They are bought for what they will do. So, if you want to understand what you can truly earn, you need to understand how annuity earnings work across the different types of annuities.

What You Earn from a Multi-Year Guarantee Annuity

A Multi-Year Guarantee Annuity is the simplest annuity on the planet. It is the industry’s version of a Certificate of Deposit. You receive a guaranteed interest rate for a specific term. That interest rate never changes during that period.

If the Multi-Year Guarantee Annuity offers 5.5% for 5 years, that is exactly what you will earn. There are no moving parts, no index formulas, no caps, no participation rates, and no market guessing. It is a contractual yield. You always know the exact return because the contract specifies it.

What You Earn from an Immediate Annuity

The earnings from a Single Premium Immediate Annuity do not come in the form of an interest rate. You earn a lifetime income stream that arrives every month for the rest of your life or the rest of your joint life if you attach a spouse. That payment is based on your life expectancy and the structure you choose.

The older you are, the higher the payout. That is because the insurance company is pricing your expected lifespan. The value you earn is not in an accumulation statement. It is in the guaranteed income that hits your bank account every month, regardless of how long you live.

What You Earn from a Deferred Income Annuity

A Deferred Income Annuity works the same way as an Immediate Annuity, except the income begins later. Because you are deferring the start date, the lifetime income payout is higher once it begins. This increase is not market-based. It is based entirely on the deferral period and actuarial math.

What you earn is the future guaranteed income that you have locked in today. That income is guaranteed even if markets collapse or interest rates change. The longer you defer, the higher the payout, because life expectancy decreases and the guarantees increase.

What You Earn from a Qualified Longevity Annuity Contract

A Qualified Longevity Annuity Contract is a specialized version of a Deferred Income Annuity purchased with IRA funds. The earnings here are not expressed as a rate. They are expressed as future lifetime income, often beginning in your seventies or early eighties.

The value is in the guarantee. You lock in income that will arrive deep into retirement when many people need it most. That income is unaffected by market volatility and is guaranteed for life.

What You Earn from an Income Rider

Income Riders create even more confusion because many people believe the rider value is money they can withdraw as a lump sum. It is not. The Income Rider value is a calculation used only to determine lifetime income. It is not a cash value.

What you earn from an Income Rider is a guaranteed withdrawal amount for life, based on the rider terms, your age when income begins, and the carrier’s payout factors. The rider often grows at a guaranteed percentage until you start the income, but that growth is not money you can cash out. It is simply part of the formula used to determine the payout.

Why Market Stories Do Not Equal Earnings

Many people are pitched annuities with hypothetical market stories. They are shown back-tested index scenarios, optimistic caps, and participation rates that make the annuity look like a growth product. But what you actually earn from an annuity is not determined by these stories. It is determined by the contract.

Fixed Index Annuities can credit interest when the index performs, but they can also credit zero in any given year. Your principal is protected, but the interest is not guaranteed. That is why these products are not true growth vehicles. They are accumulation products with controlled upside and complete downside protection.

The Only Way to Know What You Will Earn

If you want to know what you will really earn from an annuity, focus on the guarantee. Do not look at projections. Do not rely on back-tested numbers. Do not get caught up in potential returns.

Quote all carriers. Compare the contractual guarantees. Look at the actual numbers tied to your specific age, your state of residence, and the start date you want. The guarantee is the only number that matters. That number will tell you exactly what you will earn.

The Bottom Line

What you earn from an annuity has nothing to do with dreams or projections. It has everything to do with the contract. Multi-Year Guarantee Annuities earn a fixed rate. Immediate Annuities and Deferred Income Annuities earn guaranteed lifetime income. Qualified Longevity Annuity Contracts earn income later in life. Income Riders earn payout guarantees that are not tied to market performance.

If you stay focused on the contractual guarantee, you always know exactly what your annuity will deliver. It is predictable. It is stable. It is clear. And in retirement planning, clarity is one of the most valuable things you can earn.