A $400,000 Annuity Guarantees $2,600 a Month for Life, but Here Is the $190,000 Retirees Are Giving Up Carl Sullivan Tue, June 30, 2026 at 7:35 AM PDT 5 min read Quick Read A life-only SPIA on $400,000 pays $2,600 monthly but surrenders roughly $190,000 in residual estate value to the insurer at death. Most of each annuity check is simply return of principal, not yield, and fixed payments lose real value as inflation compounds over decades. Partial annuitization covers only the gap between Social Security and fixed expenses, keeping remaining assets liquid, inheritable, and invested. Are you ahead, or behind on retirement? SmartAsset's free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don't waste another minute; learn more here. A 65-year-old retiree with $400,000 set aside is considering an annuity that pays roughly $2,600 a month, guaranteed for life. That's about $31,200 a year, paid like clockwork until they die. No market risk. No sequence-of-returns worry. No spreadsheet to maintain. Fox_Ana / Shutterstock.com It's a tempting deal, especially when the 10-year Treasury has already swung from about 4% to nearly 4.7% over the past year. But there's a trade-off: roughly $190,000 in expected estate value the retiree gives up over a normal lifespan. Baby Boomers currently hold an average 401(k) balance around $267,900, and a $400,000 nest egg sits comfortably in the "enough to consider annuitizing some of it" range. Clark Howard has fielded the annuity question for years, telling listeners to run their pension or lump sum through immediateannuities.com to see what the market will actually pay before deciding. Why $2,600 a Month Looks Better Than It Is A single-premium immediate annuity (SPIA) converts a lump sum into lifetime income. The insurer prices the payout off long-term interest rates, primarily the 10-year Treasury, currently around 4.4%. The $2,600 figure looks like a fat yield, but most of each check is return of principal. The insurer is paying you back your own money plus a modest interest layer, then keeping whatever's left when you die. Are you ahead, or behind on retirement? SmartAsset's free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don't waste another minute; learn more here. A 65-year-old today has remaining life expectancy of about 20.6 years. If that same $400,000 stayed invested in a 4% balanced portfolio with the retiree pulling $31,200 a year out of it, the math projects roughly $190,000 of residual value still sitting in the account at death. On a life-only SPIA, that residual goes to the insurance company. Your heirs get zero. Story Continues The second cost is inflation. The 2026 Social Security COLA was 2.8%, and Core PCE currently sits at a 91st-percentile reading versus the past year. A fixed $2,600 check buys measurably less every year....
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