What an annuity payment is and how to find yours
An annuity payment is a fixed or variable amount of money you receive on a regular schedule—usually monthly, quarterly, or annually—from an insurance contract or investment account you've already purchased. The payment amount depends on three things: how much money you put in (or was put in for you), how long the insurance company or fund manager expects to pay you, and what interest rate or investment return is built into the contract.
To find out what your specific payment will be, you need to locate three documents: your annuity contract (which names the insurance company or provider), your most recent statement (which shows your current account balance), and any paperwork about when payments start. If you inherited an annuity or received one as part of a settlement, you may have a beneficiary letter instead. Start by calling the company listed on your statement—they can tell you the exact payment amount, the start date, and the schedule.
Key Takeaways
- Your annuity payment amount is calculated by the insurance company or fund based on your account balance, your age or life expectancy, and the contract terms—you do not calculate it yourself.
- The company that sold or manages your annuity can tell you the payment in one phone call; the phone number is on your contract or statement.
- Immediate annuities (you start receiving money right away) and deferred annuities (you start later) have different payment schedules and amounts.
- If you inherited an annuity, the payment may be different from what the original owner would have received, depending on IRS rules about beneficiary payouts.
Finding your annuity contract and statement
Your annuity contract is a legal document from an insurance company or investment firm. It should be in a file with your financial papers, or in email if you set up the annuity online. The contract lists the company name, your account number, the date you purchased it, and the terms—including how much you paid in and what the payout structure is.
Your most recent statement shows your current balance and, often, the projected payment amount. Statements arrive by mail or email, usually quarterly or annually. If you cannot find either document, call the company directly. You can find the phone number by searching the company name online (for example, "Fidelity annuity customer service") or by checking old bank statements or tax forms—annuity payments are reported on Form 1099-R each year.
The difference between immediate and deferred annuities
An immediate annuity is one you buy with a lump sum and start receiving payments from right away, usually within a month or two. The payment amount is locked in at the time you buy it and does not change (unless you chose a variable annuity tied to market performance). The company calculates your payment based on your age, the amount you invested, and how long they expect to pay you.
A deferred annuity is one where you invest money over time or make a lump-sum purchase but do not start receiving payments until a date you choose—sometimes years later. The payment amount is not set until you actually start withdrawing. The longer you wait to start, the larger each payment will be, because the money has had more time to grow and you have fewer years left to receive it.
If you own a deferred annuity and want to know what your payment will be when you start, the company can run a projection for you. This is not a may provide—especially if the annuity is variable and tied to investments—but it gives you a realistic estimate based on current account value and contract terms.
How the insurance company calculates the payment amount
The company uses a formula that accounts for your account balance, your age (or the age of the annuitant—the person the annuity is based on), and the payout period you chose. Common payout periods are "life only" (payments stop when you die), "life with period certain" (payments continue to a beneficiary for a set number of years if you die early), or "joint and survivor" (payments continue to a spouse or partner for life).
The younger you are when you start, the smaller each payment will be, because the company expects to pay you for longer. The older you are, the larger each payment, because the payout period is shorter. If you chose a joint-and-survivor option, the payment is smaller than life-only, because two people may receive money instead of one.
You cannot change this calculation yourself. The insurance company or fund manager does it using actuarial tables and the terms written into your contract. If you want to know how a different payout option would change your payment, ask the company for a comparison—they can show you what "life only" versus "life with 10-year period certain" would mean in dollars.
What to do if you inherited an annuity
If you inherited an annuity from a spouse, parent, or other person, the payment rules are different. The IRS allows certain beneficiaries to stretch payments over their own lifetime, while others must take the money out within a set number of years. The payment amount you receive depends on which category you fall into and your age.
Contact the insurance company and tell them you are a beneficiary. They will send you a beneficiary packet with instructions on how to claim the annuity and what your payout options are. Do not delay—some annuities have deadlines for beneficiaries to claim them. The company will explain whether you can take payments over your lifetime, whether you must take a lump sum, or whether you have a choice. Your payment amount will be recalculated based on your age and the beneficiary rules that apply to you.
Understanding fixed versus variable annuity payments
A fixed annuity pays you the same amount every month for the life of the contract. The insurance company guarantees this amount, and it does not change based on market performance. Once you know the payment, you know exactly what to expect.
A variable annuity payment amount changes based on how the underlying investments perform. You choose how your money is invested (usually in mutual funds), and your payment goes up or down depending on whether those investments gain or lose value. The company will give you a base payment amount, but your actual payment in any given month may be higher or lower.
If you own a variable annuity, ask the company for your current payment amount and whether it has changed recently. They can also show you a history of payments over the past year so you can see the range. This helps you budget, because you will know the payment is not fixed.
What happens if you need to change your payment schedule
Most annuity contracts allow you to change how often you receive payments—from monthly to quarterly, for example—without penalty. Some contracts also let you take a lump-sum withdrawal or change your payout option, but this may trigger taxes or surrender charges depending on the contract terms and how long you have owned the annuity.
Before you make any changes, call the company and ask what your options are and whether there are any costs. If you are under age 59½, withdrawals may trigger a 10 percent early-withdrawal penalty from the IRS, plus income tax on the amount withdrawn. The company can explain what applies to your specific contract.
Frequently Asked Questions
How do I know if my annuity payment is correct?
Compare your payment to your contract terms and your account balance. The company can run a calculation for you to confirm. If the payment seems too low or too high, ask the company to explain the calculation—they should be able to show you the formula and the numbers they used.
Can I get a larger annuity payment?
Not from your current annuity—the payment is set by the contract. If you have a deferred annuity and have not started payments yet, waiting longer will increase the payment. You could also purchase an additional annuity with new money, which would have its own separate payment based on current rates.
What if I do not have my contract anymore?
Call the insurance company or investment firm that manages the annuity. Give them your name, Social Security number, and account number (from your statement). They can email or mail you a copy of the contract and answer questions about your payment.
Does my annuity payment count as income for taxes?
Yes. Annuity payments are reported on Form 1099-R each year, and you owe income tax on the taxable portion. The company will tell you what portion is taxable when you start receiving payments. Some of your payment may be a return of your own money (not taxable) and some may be earnings (taxable).
What if the company goes out of business?
Insurance companies are regulated by state insurance commissioners, and most states have a guaranty fund that protects annuity holders if an insurer fails. The protection limit varies by state but is usually at least $250,000 per person per company. Check your state's insurance commissioner website to learn the specific limit where you live.